As more and more people are looking to forge a connection with those surrounding them, neighborhoods with Home Owner Associations (HOAs) have become more popular. But it's no easy task to be on the board that organizes neighborhood events, upkeeps recreational structures and handles general maintenance matters.
If you're a part of a HOA, it's important to make the best use of your budget by responsibly planning for the use of association fees. Here's a few tips that can help.
Remember HOA responsibilities
The first step in understanding whether your association fees are being used correctly is to set the responsibilities of your HOA straight.
Make a list of all of the expenses you know will be responsible for the HOA. Generally, this will likely include:
- Common area landscape maintenance
- Roadway maintenance, including snow plowing and towing
- Street Lights
- Recreation maintenance, including swimming pools and playgrounds
Also factor in administrative costs and other expenses resulting from routine inspections and enforcement of community rules.
Since many of these factors won’t have a finite amount, it’s a good idea to keep record of all expenses from previous years to take an average cost for each expenditure.
An emergency fund
Once you’ve determined the amount you’ll need to collect to meet HOA responsibilities as agreed upon in the property contract, you will need to make room for unexpected/unusual expenses.
This “accident fund” might be used if a community mailbox, sign, wall or fence is damaged and needs to be replaced or repaired. If there are bad storms, it might cover telephone lines damaged by falling trees. Other examples could be replacing a lawnmower or repairing an issue with the swimming pool.
Choosing to make room for these costs before they happen prevents the HOA from up charging unprepared residents after an issue arises. In most cases, this fund will be used. However, it’s a good idea to be prepared with upkeep options you can use the fund for if it is not used by the end of the year.
If possible, allow your residents to vote on this improvement during monthly meetings to encourage their involvement. Also, always keep record of how the budget is spent to assure residents that their assessment fees are being spent appropriately.
Giving residents a voice
The contract residents sign when they purchase a property with your HOA should outline the conditions in which assessment fees can be used and increased. However, the HOA should continue to inform residents how these fees are being used during annual meetings, in a newsletter, on a bulletin, etc.
Allowing residents access to this information and opportunity to voice any concerns can help eliminate mistakes and conflict from occurring. If a resident believes you are not within your rights, a professional who understands the in’s and out’s of the law can help defend your party.