Assessments are one of the most sensitive subjects in any community. They come straight out of each owner's pocket, and board members, who are owners too, naturally want to keep them low. But the board's duty is to operate and maintain the property, and that sometimes means an increase is the responsible choice.
This article is general information and is not legal advice. The association's attorney should be consulted.
The Hidden Cost of Flat Dues
Some boards work hard to keep dues unchanged for as many years as possible. To do it, corners are cut: landscaping is scaled back, cleaning visits are reduced, painting is postponed, reserve contributions are trimmed, and insurance deductibles are raised.
These choices do not remove costs. They move them into the future and make them larger. Deferred maintenance leads to more damage, appearance and amenities slip, and property values can suffer. When the bills finally arrive, they are often paid through a large special assessment or a steep one-year increase. The effects of underfunding are described in
consequences of not having cash reserves.
Costs Rise Every Year
Nearly everything an association buys becomes more expensive over time. Landscaping, janitorial, security, pool service, and painting contracts depend heavily on labor, and labor costs in Florida have risen in recent years, including through scheduled minimum wage increases. Insurance premiums, utilities, and repair materials have also climbed.
When dues are adjusted in modest steps that follow actual costs, owners can plan for the change. When they are frozen and then raised sharply, owners are hit all at once.
Start With Service Levels, Not a Target Number
A better budget begins with a question: what level of service and maintenance does the community expect? Once that is defined, the cost of delivering it can be estimated, and the dues needed to pay for it follow from the numbers.
This approach includes:
- Current contract prices and any scheduled increases
- Insurance renewal estimates
- Utility trends
- Reserve contributions based on a current reserve study
- A reasonable cushion for unexpected repairs
A budget built this way can be explained and defended. A budget built around keeping a number flat usually cannot.
Florida Budget Rules to Keep in Mind
Condominiums. Under section 718.112(2)(e) of the Florida Statutes, any meeting where the proposed annual budget is considered must be open to all unit owners. At least 14 days before the meeting, a notice and a copy of the proposed budget must be hand delivered, mailed, or electronically sent to each owner, and an affidavit showing that notice was given must be filed in the official records. If a proposed budget would require assessments above 115 percent of the prior year's assessments, the board must also propose a substitute budget that leaves out discretionary expenditures, with at least 14 days' notice of that meeting. The owners may adopt the substitute budget by a majority of all voting interests unless the bylaws require more.
Homeowners associations. Under section 720.303(6), the association must prepare an annual budget showing estimated revenues and expenses, and each member must receive a copy of the budget or a notice that a copy is available at no charge. An assessment may not be levied at a board meeting unless the meeting notice states that assessments will be considered, and notice of such a meeting must be given at least 14 days in advance under section 720.303(2).
Reserve rules for both types of associations also affect the budget. The basics are covered in
understanding the importance of reserves for your condo or HOA.
How to Prepare Owners for an Increase
An increase is received far better when owners understand it. These steps help:
- Groundwork should be laid several months before the budget meeting.
- Owners should be reminded what their dues pay for.
- The proposed budget should be shared and owners invited to review it.
- Planned improvements and repairs should be explained.
- The reasons for the increase, such as higher contract or insurance costs, should be stated plainly.
- Questions should be welcomed, both at the meeting and through the manager.
Surprise increases damage trust. Planning, steady communication, and open books make a necessary increase easier to accept.
Help With Budgets
Budget preparation, reserve planning, and owner communication are handled for the communities managed by Condominium Associates. To talk about your association's next budget,
contact us.
