Hi,
Most HOA boards keep dues as low as they can, believing that’s what owners want. It’s also the exact reason nearly three out of four associations are underfunded – and why the roof, the elevator, or the pavement eventually shows up as a five-figure special assessment nobody saw coming.
Keeping dues flat feels responsible. It just quietly moves the bill to later, and makes it bigger. If any of this is your association, the assessment is already building:
- You’ve held dues flat for years to avoid upsetting owners
- You’ve never had a reserve study, or the last one is several years old
- You can’t say what percent funded your reserves actually are
- Your reserve contribution is a round number in the budget, not tied to what your components actually cost to replace
- The plan for the next major repair is “we’ll figure it out when it comes”
Here is what the data actually says:
- Roughly 70% of HOAs are underfunded – the highest rate ever recorded – because contributions never kept pace with what roofs, elevators, and pavement now cost
- Below 30% funded is the danger zone. At that level a special assessment isn’t a risk, it’s a matter of when
- When the money isn’t there, owners get hit with assessments that commonly run $5,000 to $100,000+ per unit, sometimes with as little as 30 days notice
- Underfunding doesn’t stay contained – it forces dues up anyway, can cost a building its mortgage financing, and drags down every owner’s property value
- The fix is boringly effective: associations that update their reserve study more than once every five years see special assessments about 35% lower on average
That last number is the whole point. A reserve study only works if someone acts on it. That is what we do – calculate your actual percent funded, build a contribution plan that heads the assessment off instead of pretending it won’t arrive, and keep it current so you’re funding against real replacement costs, not a guess from years ago.
Reply to this email by Friday and we will set up a free 15-minute call with one of our senior audit professionals. Send us your most recent reserve study, or tell us the last time you had one, and we will tell you roughly where your association stands – and what an assessment would look like if a major repair hit today.
Sincerely,
—
George Dimov, CPA
Licensed and Insured
(833) 829-1120 toll free
(212) 994-8081 Fax
www.dimovtax.com