Anybody who lives in a planned community most likely is part of a Homeowners’ Association that requires members to pay fees. The fees cover the day to day and operating expenses of the community. Unfortunately, the regular dues don’t always cover all of the association’s expenses, especially if there are unexpected costs that the reserves can’t account for. This is where special assessments come in.
How HOAs Form Their Budget
Before we further explain what special assessments are, it is important to understand how HOAs form their budget and how they receive their money. Every year, the board will craft a community budget that includes how much each household must pay in monthly HOA dues.
These dues will go to two separate areas of the budget. Most of it will help the HOA cover current year operating expenditures. This will include budget items like landscaping, pool maintenance, playground maintenance, insurance, and so forth. The rest of the dues will go into the reserves, which is a part of the budget set aside for long-term repairs and replacements, such as a roof replacement for the community clubhouse, or the cost of repaving the roads. The reserves also cover unforeseen costs that the association can’t plan for.
HOAs need to have a solid amount of money saved away in the reserves. Not all expenses can be foreseen, but most can. The board needs to plan 3, 5, or even 10 years in advance to plan for future repairs, maintenance, and other costs. Unfortunately, if the reserves don’t cover all of these costs, a special assessment may be necessary.
When Special Assessments are Necessary
The board can plan all they want, but sometimes their predictions are not accurate. If an HOA needs to come up with additional funds to cover an unfunded expense, the board of directors has the power to levy a special assessment to pay for the expense of a major repair or improvement.
Special assessments are one-time assessments that may become necessary for several reasons, such as:
- ● The monthly operating expenses may be higher than expected, for several reasons
- ● Some homeowners might miss their monthly HOA dues payments
- ● An unexpected accident or natural disaster can cause unforeseen damage that insurance does not cover.
Learn More About How Cedar Management Group Can Help You with HOA Special Assessment
At CMG, we offer our services to a diverse set of communities, including HOAs, condo associations, commercial associations, and golf & club communities, among others. If you are looking for professional and personal community management services for your association, contact us online, give us a call at (877) 252-3327 or request a proposal online.