By Deborah Goonan, Independent American Communities
Las Brisas condominium association residents have just learned that their HOA assessments will be increasing from $154 per month to $255 per month, unless a majority of members can defeat the proposed budget by voting no on the increase.
The chances of 51% of owners voting against the assessment increase is slim. And even if the dues increase is not approved, the association is likely to end up in receivership, under control of the state of Nevada. Either way, residents will have to pay up.
Why is there a 65% dues increase?
Because the Nevada Real Estate Commission is mandating Las Brisas Condo Association to fund its reserves. Under Nevada law, all common interest communities are required to perform a reserve study every 5 years, and submit summary form to the Real Estate Division. (see this Ombudsman’s newsletter, page 4.)
Representatives from Shelter Management, Las Brisas’ new management company, say the HOA has failed to contribute adequately to its reserve fund since the 1970s.
Given that Nevada statute requirements for reserve funding began in 2000, it’s unclear how Las Brisas was able to escape adequate funding of reserves for the past 15 years.
Nevertheless, now association members have to play “catch up” to make up for decades of artificially low assessments. That makes life particularly difficult for senior citizens living on Social Security.
The fundamental Association-Governance flaw
Las Brisas is but one example of thousands of underfunded HOAs in the US.
An analysis of over 8000 communities between 2010-2012 revealed that 72% had under-funded reserves, according to Robert Nordlund of Association Reserves.
And, unlike Nevada, most states do not require all of their Association-Governed Residential Communities to establish and maintain fully-funded reserves.
Developers tend to set relatively low assessments when homes are new, for the purpose of selling more homes at higher prices. Volunteer homeowner boards often continue to avoid increasing assessments, mainly because they believe members won’t approve, or that higher assessments will discourage homebuyers on resale properties.
That often leads to deferred maintenance and the need for more expensive repairs when the association is finally forced to do them. That, in turn, leads to special assessments or significant monthly or annual dues increases or both.
As much as we might complain about property tax increases, I have never heard of a 65% tax increase from the previous year. But reports of steep assessment increases and out of control special assessments are becoming more and more common in homeowner and condominium associations.