Do HOA fees go up? It is normal for fees to increase over time as economic factors and association needs evolve, but that does not mean boards can raise dues without thought. Homeowners have a right to understand why their fees are going up. Meanwhile, boards must know the proper way to raise fees to avoid community conflict.
Do HOA Fees Go Up Every Year?
Homeowners associations are known for charging regular dues that cover day-to-day and long-term expenses. These dues are collected from homeowners who agree to fulfill this financial obligation upon purchasing their properties. Owners might be informed of a certain amount at the time, but this rarely stays the same.
So, does the HOA fee increase every year?
Yes, HOA fees typically go up annually to keep up with the changing economy. Inflation, rising maintenance costs, and rising insurance premiums can all affect how much fees increase. The need to fund reserve accounts for major repairs and replacements also contributes to raising dues.
While annual increases are the norm, the frequency can vary depending on the community’s needs and budget. State laws and the association’s governing documents can also dictate a cap on dues increases. That said, yearly incremental increases are more common, but some may have larger increases less frequently.
Why Do HOA Fees Go Up?
Fees don’t stay the same forever, but itis essential to understand the rationale behind them. HOA fees yearly increase for a number of reasons.
1. Economic Factors
Prices fluctuate due to economic factors like inflation. Vendor services may cost more, and material costs can also rise. To maintain the same quality of service, associations must meet these pricing changes.
2. Insurance Premiums
Many insurance providers raise their premiums over time, especially if they take on more risk. For example, if an area is expected to suffer from more hurricanes in the year ahead, insurers may demand higher premiums.
3. Maintenance Needs
Maintenance is a primary responsibility of an HOA or condo community. While planning and preventive maintenance help, unexpected repairs can still drive up costs.
4. Reserve Funding
Many associations are required to maintain reserves under state laws or their governing documents. To fulfill this requirement and keep the community prepared for long-term expenses, the board must factor in reserve contributions when calculating dues. Often, when reserves are low or the HOA is in the early stages of building an adequate fund, the board needs to raise dues significantly to reach the right funding level.
5. HOA Projects
Communities that have new amenities or upgrades planned for the year tend to have higher cost demands. This leads to raised dues. Ultimately, it will depend on the association’s needs and projects.
How Often Do HOA Fees Go Up?
Most associations review their budgets annually, leading to annual fee increases. That said, this is not always the case. Some communities, particularly small ones, can operate on the same budget for several years, only needing to adjust when major changes occur.
Is January a Good Time to Increase HOA Dues?
Yes, January is a good time to raise dues as it is usually when the new fiscal year begins. Associations begin the budget planning process months in advance, anticipating the community’s needs and expenditures for the year ahead. Come January, this new budget comes into effect. Typically, this new budget necessitates an increase in fees.
How Much Do HOA Fees Go Up?
There is no standard or universal amount for dues increases. They really depend on the association’s financial health and needs. Some states limit increases by law, either by a certain amount or percentage. Meanwhile, other communities must defer to their CC&Rs and bylaws for guidance.
That said, there should be a reasonable cause for the increase. Boards should never arbitrarily raise dues. Proper research and planning are critical in ensuring the association meets its budgetary needs while simultaneously keeping owners happy.
Does an HOA Dues Increase Require a Vote?
An HOA or condo board typically does not need homeowners’ permission to raise dues. That said, state laws and governing documents can vary, so they can change from one community to another.
Generally, a board vote is the only approval needed to pass an HOA or condo dues increase. Sometimes, an association may be required to ratify the budget, which would affect fee calculations. But it is important to understand that consistently requiring a membership vote for dues would significantly slow things down. Operations would halt, and projects would be delayed.
In some states, associations must obtain homeowners’ approval for increases above a certain amount or percentage. For example, Section 33-1803 of Arizona law requires a membership vote for increases of more than 20% from the previous year. An association’s CC&Rs or bylaws may have similar provisions.
Communicating Increases to Homeowners
Nobody wants to be surprised by sudden expenses or additional financial obligations. It is up to the HOA board to communicate with homeowners and ensure they are aware of potential dues increases and the reasons behind them.
Communication is necessary for transparency. Homeowners have a right to know where their money is going. It is also essential to keep them informed so they can prepare in advance. Some owners need to adjust their budget to accommodate the change.
Additionally, communication builds trust between homeowners and the board. It keeps leaders accountable, as homeowners can later verify whether the funds went to the items or projects as the board promised.
Furthermore, communicating increases will minimize disputes in the long run. When owners understand why the increase is necessary, they are less likely to complain or challenge the board.
Do HOA Fees Go Up? Answered!
Dues increases are normal, and even necessary, in an HOA or condo community. The board must make adjustments to keep up with economic fluctuations and ever-changing needs. That said, it is crucial to strike the right balance between collecting dues and keeping owners satisfied, which is where communication comes into play.
Cedar Management Group provides financial management services to HOAs and condo associations. Call us today at (877) 252-3327 or email us at help@mycmg.com to get started!
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