Below is a helpful tip from the Davis-Stirling.com Newsletter by ADAMS | STIRLING PLC regarding underfunded reserves and emergency assessments at HOA communities . . .

QUESTION: My husband and I are both in our 70s. Our HOA is trying to pass a $2100/year increase in dues per unit for the next six years to fund our reserves. We are on fixed incomes. I was on the board for 20 years and retired three years ago. Our dues were $170 back then and now are $740 monthly–increasing dramatically after I quit the board. I would rather have an emergency assessment than increase our dues. – Michelle D.

ANSWER: It’s unfortunate that prior boards underfunded your reserves such that your current board is forced to play catch-up. It is better to gradually increase your reserves over the next six years than to have sudden large emergency assessments. Such assessments can force owners out of their units and lead to litigation.

Underfunded reserves and deferred maintenance can also cause a condominium association to be blacklisted by Fannie Mae–meaning lenders would stop funding loans to potential buyers of units in your association. That, in turn, would drive down property values.

By statute, boards must impose regular and special assessments sufficient to perform their obligations under the governing documents, which includes properly funding reserves. (Civ. Code § 5600(a)) You may need to tighten your belt for the next six years while your association builds healthy reserves.

DISCLAIMER. The Davis-Stirling.com Newsletter by ADAMS | STIRLING PLC provides commentary only, not legal advice. For legal advice, you’ll need to hire legal counsel.  You can hire ADAMS | STIRLING PLC; Keep in mind they are considered corporate counsel to associations only.