Ask the HOA Expert: Changing The Governing Documents
Written By: Richard Thompson
Tuesday, February 13, 2018
Question: Our homeowner association has 30 single family detached homes. Our governing documents were basically written for townhomes. One of the bothersome issues is that the governing documents state that the HOA is responsible for replacing roofs, painting, gutters and other things that are commonly done with condominiums. Many owners object to building up a reserve fund to pay for repairs that may be as much as 20 years or more down the road.
The covenants also state that the board cannot special assess for anything other than common area improvements. So that leaves us with pretty much the options of building up the reserve fund or changing the governing documents. Can you provide us some sample wording for a single family home HOA that would allow homeowners to pay for major repairs themselves but would allow the board architectural control of those repairs?
Answer: While its unusual for a single family HOAs to do exterior maintenance, repairs and replacements, its not unheard of. I doubt that the developer made a mistake on this since its a huge issue. And its doubtful that you can muster the votes to change this which may take 100 of the owners to approve it including their mortgagees. You need to consult with a knowledgeable attorney to determine the requirements. If it is possible, the attorney can assist the board with the proper wording of the amendment.
So barring you pulling off a major governing documents amendment, yes, you need a reserve plan that includes a funding plan to collect money systematically from each owner every year. The 20-years-down-the-road thinking is flawed. While a reserve event like a roof may take place 20 years down the road, the reserve plan will only charge each owner a share of the future cost directly proportional to the benefit received. For example, if a particular owner owns for five years and sells, he would only pay 5/20ths of the future roof cost. He only pays for the benefit received and not a penny more. This is the fairest way to fund future costs.
Question: Our board is being badgered by a delinquent owner because his account was turned over to collection. In hard economic times, should the board back off of collections?
Answer: As long as the board is enforcing collections uniformly, consistently and fairly, it is the boards responsibility to enforce the Collection Policy regardless of circumstance or economic climate. There is no government bail-out for HOAs.
Question: Is there an average that HOA management companies charge for managing a homeowner association? How do they base their fees...by size, number of units, expectations, etc.? Do they usually charge a flat fee or percentage? How do they charge for maintenance...as a flat fee, by the job?
Answer: Percentages are not used to determine HOA management fees. Commonly, the management fee is expressed as the cost "per door". But behind the per door concept is an analysis of how much time it takes the management company to execute the routine duties described in the Management Agreement. This can vary a lot from HOA to HOA. And within the fee structure, there is usually several levels and costs of service included in the routine duties like management, accounting and administrative mailing, making copies, etc..
Maintenance and repairs are charged over and above the basic duties on an hourly or bid basis. So, for a management company to make a profit, an annual estimate of all the levels of service multiplied by their hourly charges multiplied by the number of hours for each plus a profit margin equals the annual cost of management. Keep in mind, however, that most Management Agreements provide for extra charges for non-routine tasks like assisting in insurance claims, arranging contractor bids, overseeing larger renovation projects and performing special tasks requested by the board.
For more innovative homeowner association management strategies, see www.Regenesis.net
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