As a community manager and condominium owner/volunteer, I many times hear reoccurring questions and comments. Why is the Board raising our dues again this year? What can we do? Do we have to pay? Our dues are much higher than other condominium buildings in the area. The Board at the building across the street has not increased their dues in years. Note: Even though individuals refer to assessments as dues, the proper term is assessments.
Even during tough economic times and the resulting decrease in home values, the Board must not neglect to appropriately fund the annual budget too fulfill their responsibility to the community. During the budgeting process, a Board may be tempted to avoid the appropriate long-term decision, succumb to pressure from owners’ who have personal financial concerns and make the decision not to increase the annual assessments when required. This decision may cost a community in the long term.
As for the concern regarding annual assessments increase, in reality there are many reasons a Board may or may not increase the annual assessments for their community. It is imperative that one remember, some expenses cannot be avoided, i.e., the elevators still need to operate, the pool still needs cleaned, the concierge desk still needs staffed, building equipment still needs to be on a preventative maintenance program, common areas still need cleaned, reserve fund contributions need to be made, energy costs continue to rise, etc.
Assessments are not optional and each homeowner is legally required to pay them. Failure to pay assessments can result in legal action and possible foreclosure on the home. However, if a homeowner suffers from financial issues and starts to struggle in paying the monthly assessment, the owner should propose a payment plan to the Board of Directors. It is my experience that most Boards are reasonable and willing to help when a homeowner approaches them with a plan and explains their circumstances. My advice, be proactive not reactive and do not be afraid to ask for help. Doing so up-front prevents time and money spent by the Association on attorney fees to collect from a delinquent homeowner and frustration by the homeowner to defend their non-payment, as well.
In preparation of the annual budget a responsible Board should: 1) review current and historical financial data; 2) conduct a thorough review of the community’s income, expenses, and cash flow; 3) review contracts for quality of service, up-to-date comparison of costs as necessary, and contact vendors to discuss any potential increases for the upcoming year; 4) review established resident experience and lifestyle expectations; 5) review the cost of improvements or replacement of infrastructure, equipment and amenities based on a current professional reserve study. If after the appropriate due diligence and analysis an increase is warranted, the Board should prepare and adopt a budget adequate to fund the Association, increasing assessments as necessary, thus fulfilling their fiduciary responsibility.
Any comparison of assessments to other buildings / communities in the area cannot be considered to be financially sound, due to the unique combination of owners, operating expenses necessary to maintain the owners’ lifestyle expectations, age of building, building amenities, building equipment, and reserve funding. It is highly unusual for the financial requirements, amenities, common areas and lifestyle of building A to be exactly the same as the comparable requirements for building B. In addition, the Board at the building across the street who has not raised their assessments in years, may not be properly planning for their community’s long range capital needs, thus resulting in a large unplanned special assessment in the future … over-and-above the required annual assessments.