Can a Homeowners Association (HOA) Raise Fees?
If you live in a community governed by a Homeowners Association (HOA), chances are you've heard discussions about changes in community fees, or perhaps even how they keep inching higher year after year. HOAs have broad powers to manage and maintain community standards, often including the authority to levy fees necessary for their sustenance. But can an HOA simply raise these fees whenever it pleases? Only if certain conditions are met. This post unpacks the specifics of fee adjustments, why they occur, and what homeowners can do about them.
The Legal Framework
At the heart of any community association fee adjustment is a legal and procedural framework, which every HOA must adhere to. This framework typically involves the association's governing documents, such as the Covenants, Conditions, and Restrictions (CC&Rs), and applicable state laws.
-
Governing Documents: Before implementing any fee changes, the HOA board must consult its governing documents. These documents often specify the limits of fee increases and may outline specific conditions that must be met – such as obtaining member approval during an annual meeting.
-
State Laws: Certain states impose legal restrictions on how much an HOA can increase fees within a particular time period. For instance, in Arizona, state law mandates that any increase above 20% in a given year requires a majority vote from the community members. In North Carolina, similar statutes dictate processes that ensure homeowner protections against arbitrary fee hikes.
Why Do HOAs Increase Fees?
Fee increases, while sometimes unpopular, serve critical roles in maintaining community infrastructure and services.
1. Inflation and Economic Fluctuations
Inflation impacts all aspects of economic life, including the costs associated with maintaining community amenities. As the cost of goods and services like landscaping, pool maintenance, and building repairs increase, so does the need to adjust member fees to cover these expenses. Without these adjustments, an HOA might find itself unable to maintain the quality of services the community expects.
2. Reserve Funds for Future Repairs
Prudent financial management for HOAs involves maintaining a reserve fund for major repairs or unexpected occurrences, akin to a community savings account. Reserve studies conducted periodically help an HOA forecast the lifespan of significant elements (like roofs or elevators) and plan for future replacements. If a reserve fund is underfunded, increasing fees may be necessary to shore up these financial cushions and avoid the imposition of special assessments later.
Communicating Fee Increases
Handling fee increases delicately and transparently is crucial to maintaining trust between the HOA board and community members.
-
Transparency: Clear communication about why fee increases are necessary can mitigate member resistance. Sharing financial statements or inviting members to budget meetings allows homeowners to see how funds are allocated.
-
Education: Many complaints arise from misunderstandings about fee use. Boards should regularly educate members about HOA finances and the importance of maintaining property values through adequate funding.
-
Notification: Providing prior notice about proposed increases gives homeowners time to prepare financially and mentally for changes.
Managing Discontent
Despite the best efforts at transparency, fee increases often generate dissatisfaction. Addressing homeowner concerns effectively involves listening tours, where board members can hear directly from members and address grievances on a personal level.
The Consequence of Not Raising Fees
Keeping fees artificially low may be appealing but often proves detrimental. Decreased services or failing infrastructure can lead to diminished property values, and unforeseen expenses can necessitate emergency special assessments, which are often more burdensome for homeowners.
Conclusion
While nobody enjoys paying more, a structured, legal, and transparent approach to fee increases helps preserve community assets and standards. For North Carolina residents and others in HOA-governed communities, understanding the dynamics of HOA fees can aid in navigating future changes with more assurance and less frustration. Ultimately, such increases balance maintaining property values and enhancing the collective well-being of the community.
For additional guidance, HOA boards and homeowners may also benefit from consulting with management companies skilled in HOA governance, as they can offer valuable insights and management efficiencies.