I am often asked to help homeowners associations and condominiums figure out ways to make ends meet. For those communities with cash flow problems it can be challenging. Raising dues is never a popular option, but is often necessary. The governing documents for most condominiums and homeowners associations allow the board of directors to unilaterally increase dues by some amount—usually between 10% and 15%—without a vote of the membership. That makes sense because an association should be able to make regular increases to dues to keep up with the costs of the association, both the expected costs and the unforeseen costs. I’ve helped several associations amend their documents to grant this normal authority.
Another option to raise the needed cash for a community is a special assessment. These are usually reserved for those circumstances that are either unexpected, or for various reasons the association is not able to pay for a big-ticket maintenance cost that is in need of attention. The most common example is the replacement of townhome or condominium roofs. Because it is ideal that roofs be done at the same time, the costs are usually large and many communities haven’t saved enough to simply pay for them from reserves. That is where the special assessment comes in.
Because special assessments tend to be infrequent and usually result in owners having to pay large amounts, most association documents spell out specific directions for how to pass a special assessment. Whatever the provisions may be to pass a special assessment it is crucial that the board follow all steps with exactness. Otherwise, they may leave the association open to challenges that the special assessment was improperly enacted.
In order to adopt or pass a valid special assessment, the board of directors should ensure that proper procedure is followed to make certain owners are given proper notice, that any necessary quorum is met, and that votes are properly counted. In addition, there are sometimes inconsistencies or omissions in the documents themselves that create doubt about an association’s ability to pass a special assessment. I have seen documents that simply have no provision for a special assessment. I have also seen documents that do contain special assessment provisions, but they are so narrowly drawn that it is not clear the association has power to pass a special assessment and use the money for the intended purpose.
All of these issues are things a good HOA attorney can address. If your homeowners association or condo is having cash flow problems and needs help raising the revenue to meet the association’s obligations, contact a community association attorney with one of our Charlotte, Greensboro, Triangle, and Coastal offices.