Funding Options for an HOA
A community has relatively few ways to pay for common area expenses. With it being highly unlikely anyone will donate money to maintain your community, the Board will need to find a way to raise funds from the community membership. Let’s break down the typical funding options below:
Regular Assessments - this is the amount that is regularly assessed to the HOA membership on a monthly, quarterly or annual basis. These fees cover the ongoing operating expenses of the community such as insurance, lawn care, utilities, ongoing maintenance expenses as well as to fund the reserve account. With rising expenses to the operating expenses it is often an easy and short term strategy to cut the reserve account allocation rate instead of voting to increase the HOA dues.
Special Assessments - these are irregular and often unplanned expenses to homeowners for a project or numerous projects that need to be completed in the community. Typically these are voted on and implemented in a relative short time frame and homeowners will be required to come up with large amounts of money on short notice. Special assessments of $3,000-10,000 are common with amounts above $10,000 occurring fairly regularly for some communities which have put off repairs & replacements for an extended period of time. Special assessments absolutely have their place but it’s not for expected common area expenses – an expensive and unfair choice for the Board to follow.