HOAs are typically funded by the collection of fees from their community
members. These collections allow the HOA to budget and pay for all the work
that goes into maintaining the community. However, in the unfortunate
circumstance that an HOA falls short on coming up with the necessary funds to
cover large and unexpected HOA maintenance, a Special Assessment can be
enacted.
In this situation, the community board has the authority to increase
membership dues to cover an unexpected expense that members are then obligated
to pay.
Special Assessments should be only viewed as a last resort when dealing with
an unexpected large expense that the community does not have the funds to
cover. They damage community morale and could put a lot of your community
members in a financial bind.
The best way to avoid the need for ever having to do a Special Assessment is
for your community to have a reserve fund in place and to maintain its growth
responsibly. This fund will be available for your community to use in the event
of a large unexpected expense. However, the reserve fund is only as good as the
collections that the community is able to make. It is vital that HOAs stay on
top of collections to keep things running smoothly.
Despite a community’s best efforts to manage itself well, a Special
Assessment may be unavoidable. You’ve done everything right, you’ve had your
reserve study done, you’ve kept your reserve fund growing healthily, but an
expense pops up out of nowhere that is outside the scope of the funds you have
been saving in the reserve. Situations like this for well-run HOAs are
extremely rare, but they do happen.
At Your Community Manager, we do our absolute best to ensure that our
communities don’t need to rely on Special Assessments for any unexpected
expenses. However, we do understand that for some communities, it is
unavoidable. If your community is dealing with this issue currently or are
concerned that your Board may run into it in the future, don’t hesitate to reach
out to us for help.