An HOA assessment increase is a topic that often stirs discussions and concerns within communities. Misconceptions can lead to misunderstandings, unnecessary anxiety among unit owners, and tension within the community. Fortunately, through education and communication, the board can dispel these misconceptions.
Myths About Condo HOA Assessment Increase
Condominiums rely on dues and assessments to fund day-to-day expenses and long-term needs. Unit owners have an obligation to pay these fees, along with special assessments. While assessments play an integral role, misunderstandings often arise when the board raises these amounts.
Increasing HOA assessments is sometimes necessary to keep funding healthy. A lot of things can cause the need for an increase, including emergencies, inflation, and a high delinquency rate. When left unclear, owners can get the wrong impression.
Board members must do their best to clarify these notions. Otherwise, it can lead to unrest, disputes, and even frivolous lawsuits. Below are the most common myths about an HOA assessment increase.
1. Assessments Only Increase When There’s Mismanagement by the Board
One of the most common misconceptions among condo owners is that assessment hikes are the sole result of fiscal mismanagement. In reality, assessments can increase due to rising costs of maintenance, utilities, insurance, and other necessary services. Board members should be transparent with the budget and clearly explain how funds are being allocated.
2. The Board Can Raise Assessments Arbitrarily
Condo boards cannot increase assessments without valid reasons. Increases are typically in response to rising expenses or planned community improvements.
To raise HOA special assessment or regular dues, boards must follow the association’s bylaws. Board members must also hold transparent discussions and obtain a majority vote at an open meeting before implementing an increase.
3. Reserves Mean Assessments Should Never Increase
Having reserve funds is mandatory in Illinois (765 ILCS 605/9), but they may not cover all future expenses, especially for major repairs or improvements. Regular increases in assessments ensure reserves are gradually built and allow the community to face unforeseen challenges without imposing sudden, large special assessments.
When discussing financial planning with owners, be sure to explain how the budget is allocated into two main financial accounts — an operating fund and a reserve fund. This distinction will help owners understand where their money is going.
4. Assessment Hikes Always Lead to Improved Amenities
While an HOA assessment increase might contribute to community enhancements, they are not always earmarked for visible upgrades. Assessments also cover essential services, emergency reserves, and ongoing maintenance. Open communication should ensure that residents understand the diverse ways in which their contributions are being allocated and spent.
5. Special Assessments are Always a Sign of Poor Planning
Many owners assume that special assessments only happen when the board fails to plan ahead. While poor planning can certainly be a factor, special assessments are often triggered by unexpected expenses. These include storm damage, insurance gaps, or urgent structural repairs. Even well-funded associations may need them in certain situations.
6. Assessment Increases Should Match Inflation Only
Some owners believe dues should only rise at the same rate as inflation. In reality, an association’s expenses do not always follow standard inflation rates.
There are several other factors that can influence dues and assessments. These include insurance premiums, vendor contracts, and utility costs. Some expenses even increase at a much faster rate than inflation, requiring larger adjustments to assessments.
7. New Projects are the Main Reason for Assessment Increases
It is easy to assume that assessment hikes are driven by new amenities or capital projects. Yet, in many cases, increases are the result of rising operating costs, deferred maintenance, or underfunded reserves. Much of the budget goes toward maintaining existing infrastructure, not adding new features.
8. If the HOA has No Amenities, Fees Should Stay Low
Amenities are a huge perk of living in a condo community. But some owners believe that moving into a condo with no amenities means paying low fees. Owners should not expect stable assessments just because a community doesn’t have pools, gyms, or clubhouses.
Even without amenities, associations still pay for other expenses, such as insurance, maintenance, landscaping, utilities, and administrative costs. These expenses can increase over time, resulting in higher dues.
9. The Board Should Avoid Increases to Keep Owners Happy
Some believe boards should delay increases to avoid pushback from unit owners. But in truth, postponing necessary increases can lead to larger financial problems later on.
Instead, boards should go for gradual increases, as these tend to be more predictable. It also gives owners a chance to adjust their household budget incrementally. The result is a more manageable increase than a sudden, significant hike.
10. All Owners are Affected the Same Way by Increases
Not all increases impact owners equally. Assessment allocations are often based on unit size or percentage interest in a condominium. Because of this, some owners may see larger increases than others. Boards must understand how the allocation formula works. In doing so, they can clarify to owners why the amounts differ.
11. Once HOA Assessments Increase, They Should Not Decrease
Some owners assume that increases are permanent and will never go down. While it is true that the practice is less common, assessments can stabilize or even decrease. This happens when expenses drop, reserves are well-funded, or major projects are completed. The board should make adjustments based on actual financial needs.
12. The Management Company Decides Assessment Increases
Sometimes, owners believe the management company controls dues. This is incorrect. While the management company can certainly help plan the budget, the board makes the final decision. Managers only provide guidance, financial data, and recommendations. They do not have the authority to approve increases.
The Importance of Education and Communication
Misconceptions may seem harmless at first glance, but they can undermine the board’s authority and create conflict among owners. To minimize problems, board members should schedule time for communication.
Explain the thought process that went into the decision and the justifications for the increase. It is best to do this at a properly noticed open meeting. This way, owners can attend and ask questions directly to the board.
Not all owners can join meetings. To keep them updated, boards should send a written notice of the increase and the reason behind it. Small actions like these can go a long way in disproving myths.
A Sustained Effort
An HOA assessment increase can ruffle feathers and raise concerns. These concerns primarily stem from misconceptions that unit owners have. Boards can do their part and ease the collection process by educating owners and keeping open lines of communication.
Dispelling myths about HOA assessments can foster a more informed and cohesive community. For help with budget planning, communication, and all your association management needs, consider working with a condo association management company. For help here in the greater Chicago area, get in touch with our team at First Community Management.