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Contributor: American Community Management Inc. Transparency and planning is key to managing assessments.
The portion of your community’s total assessments you are responsible for paying is expressed in your governing documents. In coordination with your elected Board of Directors, your team at American Community Management believes in sound financial practices. Our planning starts as early as July so we are prepared to present a recommended budget to the Board (and ultimately prepare for your budget hearing). You should know what your association fees pay for. By attending your annual community board meetings, you will get a better understanding of how the annual budget is built and why assessments are important. The board will explain to members the assessment details, and also when and why assessments may increase on occasion. Common expenses include: Utilities (like water, electricity, gas, and the like) Insurance Maintenance needs Contracted services HOA management fees Reserve fund contributions While most costs are contracted or recurring (generally fixed costs), some may be discretionary (variable) so planning is essential. Examples of contracted or recurring costs include the management of your community, insurance policies, landscaping, payroll, janitorial services, fire system monitoring, security, and utilities. Examples of discretionary costs may include property maintenance services/repairs, landscape enhancements, social activities and administrative expenses. ACM presents many value-added services such as the usual of our community portal which saves costs to your community as well as managing insurance claims, bidding services and vetting vendors for quality of work and cost effectiveness. Board and Management Company Responsibilities The Board is essentially responsible for overseeing (with the help of your management company) the collection of assessment from all owners and coordination and payment of the operation, maintenance, repair, and planning for capital replacement projects associated with all common areas in the community. Please know that this voluntary role is often very challenging but participation is necessary. Your home is your investment. Good management and sound decision making is what it takes to protect your investment. The Annual Budget The board adopts an annual budget which includes the costs of all ongoing maintenance and operational expenses, plus an additional amount set aside in a reserve fund. This amount is divided between each homeowner in the community, which is then paid periodically in the form of an association assessment. Assessment Increases Board members pay association assessments just like everyone else, and they are working to ensure funds are used correctly. Therefore, it is reasonable to assume that the board will not vote to increase assessments unless it has been well researched, planned, and deemed absolutely necessary. However, due to inflation, the association budget generally increases each year, which results in increased assessments. How Much Can Assessments Increase? In general, the association’s Covenants, Conditions & Restrictions (CC&Rs) contain limitations on how much the association can increase assessments. For instance, many associations limit assessment increases to 10% per year, or to a maximum dollar amount per year. Though the association can generally raise assessments as often as needed to meet the annual budget, there are always rules that must be followed and conditions that must be met. There are also exceptions to this rule in the event of safety. Unpaid Assessments The association relies on all members paying their assessments in full and on time to have enough money to fund the various projects and amenities that the association is responsible for. If even one member of the association doesn’t pay their dues, the budget falls short. If multiple members neglect their assessments, money may fall into such short supply it forces the association to levy special assessments or borrow from much-needed reserves to make up the difference, which is unfair to the majority of the members to have to make up for the neglect of a few members! Special Assessments Occasionally, urgent needs will arise that do not fall under the planned budget, which leaves the board no choice but to impose a special assessment. At ACM, our focus is to consider this as a last resort. Careful planning and savings can alleviate this need, notwithstanding an inevitable or unforeseen event. In this case, the HOA may vote to collect a special assessment from each owner to fund the expense. The levying of special assessments is generally regulated by the HOA’s governing documents. The CC&Rs will dictate when and how special assessments are implemented. Attend your Annual Budget Hearing. In the state of Maryland, it is a requirement that a proposed budget be presented to the council of unit owners annually. Although the Board votes to adopt the budget, your voice is important. |
AuthorAmerican Community Management. Archives
November 2023
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