There comes a time when the board would need to raise HOA dues. But, can the board do this without securing approval from the membership? What happens if homeowners vote to reject the increase?
Can the Board Raise HOA Dues Without a Vote?
A homeowners association is responsible for maintaining the common areas of its community. To fund this, it must collect regular dues. Homeowners, in turn, are obligated to pay regular dues as stipulated in the association’s governing documents. Homeowners agree to follow the governing documents of the HOA when they first purchase a home in the community.
Dues don’t stay the same forever. The community’s needs can change, leading to a change in expenses as well. Prices can shoot up, insurance premiums can increase, and emergencies can arise. Many homeowners associations also have to make sure their reserves are sufficiently funded. To make up for these, an HOA board will sometimes have to raise fees.
But, can an HOA raise dues without a vote?
Generally, an HOA board can raise dues without getting approval from the membership. However, it really depends on what state laws and the governing documents say. The governing documents, particularly the CC&Rs, will dictate whether or not the board needs to hold a vote from the members to raise dues.
More often than not, though, boards need not get approval from homeowners. This is because the board typically knows what is best for the association. The board knows the financial situation of the HOA — they are the ones talking to vendors, writing the checks, and reviewing the financial statements. As such, even if the board does not want to raise dues, it is sometimes forced to do so because it aligns with its fiduciary duties.
Apart from the governing documents, state laws can also say whether or not approval is necessary for an increase. For example, in Arizona, a majority of the membership must approve any increase of more than 20% from the preceding fiscal year. It is also worth noting that many governing documents have similar provisions requiring a vote for increases beyond a certain percentage.
Can HOA Raise Dues Without Notice?
The HOA board is responsible for preparing the annual budget. From this budget, the board will determine how much to charge every homeowner in dues.
For most associations, the board must present the annual budget to the membership at a meeting. Homeowners can then provide input or raise concerns. The board will then vote to pass the budget and increase the fees.
Homeowners should make sure to attend all annual and board meetings. This way, they can understand what is going on in the community. That being said, the CC&Rs or bylaws normally flesh out any notice requirements for raising HOA dues. It is important to check these requirements to make sure that the HOA board is following proper procedures.
Voting on Dues Increases
There are many scenarios where a vote from the membership might come into play. An HOA board may be limited by the governing documents, which could require a vote for any increases or place a cap on dues. Sometimes, an HOA board will want to amend the documents to accommodate a higher limit or remove the voting requirement altogether. A vote may also be necessary to raise HOA dues over the percentage limit.
Whatever the vote may be, it will usually take place at a properly noticed meeting. The agenda shall include the vote, and homeowners can attend to cast their votes. Sometimes, the vote will fail, and there are a number of reasons why this might happen.
For one thing, the meeting may not reach a quorum. A quorum is the minimum number or percentage of members needed to conduct business. If not enough members attend, the meeting can’t meet a quorum, so the vote can’t proceed. At this point, the meeting will adjourn and the vote will be postponed.
Another reason why a vote might fail is due to the votes themselves. Even if a meeting reaches a quorum, if a majority of members vote not to pass the amendment or increase, then the action fails.
In either case, nothing happens. The HOA board can’t amend the governing documents or raise the dues. If the board decides to raise the dues anyway, homeowners can challenge the change. Since the board didn’t go through the proper procedure of securing enough votes, the action is considered void. While it is not recommended to simply stop paying dues, homeowners can call out the board, remove problem board members, and even take legal action.
Why Dues Increases Are Sometimes Necessary
With mortgages and bills on their minds, the last thing homeowners want is higher HOA dues. But, there are times when it is necessary to raise HOA dues. This is particularly true for older communities with outdated CC&Rs. These communities tend to have fixed dues as stipulated in their governing documents. But, these fixed dues are no longer realistic.
There are plenty of things that might cause an HOA board to increase fees. Economic factors such as inflation, the rising cost of goods, and higher wages certainly have an influence. As associations mainly rely on third-party vendors and contractors, they need to keep up with higher prices.
An HOA may also have severely underfunded reserves, which is another cause to raise HOA dues. When the reserve account doesn’t have enough money, the association risks financial ruin when the need for major repairs crops up or when emergencies arise.
Homeowners might want dues to perpetually remain the same. But, there are very real consequences of low dues or funding. The association could run out of money needed to maintain common areas. This can have a negative impact on curb appeal, which can then cause property values to plummet. In the end, it is the homeowners who bear the consequences.
Taking Careful Steps
Every now and then, the HOA board will need to raise HOA dues. But, before doing so, board members should carefully read through the association’s governing documents and any applicable state laws. Depending on these, an HOA board may need to first secure a majority vote from the homeowners.
Cedar Management Group provides exceptional HOA management services to homeowners associations and condominiums in Charlotte. Call us today at
(877) 252-3327 or contact us online to learn more.
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