HOA Annual Assessment
From our CC&Rs:
From and after January 1 of the year immediately following the conveyance of the first Lot to an Owner, the maximum annual assessment may be increased each year in accordance with the National Consumer Price Index (Bureau of Labor Statistics, United States Department of Labor, United States) for all urban consumers, all items, or a comparable index if said index is no longer published, or in any amount necessary to cover charges due by the Association for taxes and insurance regarding the Common Area owned by the Association, without a vote of the membership.
The board wants to increase the annual assessment to the homeowners not only CPI increase, but also for taxes and insurance regarding the common area. Can they do that?
I take it that the board is to increase the annual assessment by the CPI. Or, if the CPI is no longer available to increase the annual assessment by a comparable index. Or, if the CPI is no longer available, to increase the annual assessment in the amount necessary to cover the taxes and insurance.
I also take it that if the board can cut the budget and still pay for the taxes and insurance, they cannot increase the annual assessment by that much.
What is your take on this?
Thank you.
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Randy,
While this provision is fairly clear it is typically followed by provisions relative to increases in the actual assessments. The Maximum annual assessment does not necessarily reflect the actual assessment charged to homeowner on a year-to-year basis. Think of it this way the “maximum annual assessment” increases every year based on the CPI increase, whether the actual assessment increased or not. The association’s right to charge assessments is bound by what it believes is necessary to pay for all of its expenses and to provide for reserves. If you had 10 years of relatively stable actual assessments the “maximum annual assessment ” value increase thru each of those years. You can end up with a “maximum” annual assessment value that is 50 to 100% greater the actual prior year’s assessment. What this provision then does is say that theoretically you could increase your annual assessment all the way to the maximum without a vote of the members. For planned communities this is limited by state statute to an annual increase of 20% over the prior year’s assessment without a vote but if it is raised by 21% it would require the approval of a majority of all homeowners in the community. So, state law is limited to a backstop over excessive actual increases in assessments. This limitation does not apply to condominiums.
As to your specific argument and question the specific answer would depend on what other provisions are included in the declaration that were not cited here. If no other provision exist in you CC&R’s. What the provision says is that the maximum annual assessment can increase based only on the increase of cost to the association for insurance or taxes or for the increase of the CPI whichever is greater. While the last phrase is not in the CC&R it is implied.
The important thing to remember is that the “maximum annual assessment” is not directly tied to the year over year actual assessments. It becomes a moving maximum limit on any future assessment.
Dennis