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Ask the HOA Expert: Owner Not Paying Assessments

Written by on Tuesday, 24 May 2016 3:52 pm
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Question: We have an owner who has not paid an assessment for several years. The property is being used as rental property.

Answer: Your board needs to adopt a formal Collection Policy that provides for an "assignment of rents" provision. This provision allows the HOA to redirect rents to the HOA when a member fails to pay the HOA assessments. There is a sample Collection Policy at www.Regenesis.net in the Policy Samples section. Have the proposed Collection Policy reviewed by a knowledgeable HOA attorney to ensure it complies with the governing documents, federal and state statutes. The proposed Collection Policy should be circulated for comment to the members before enactment. Once enacted, start enforcing the provisions on any owner who is delinquent.

Question: Our HOA recently had a reserve study update which the board is evaluating to ensure that we are adequately funded. What is a proper funding level? I have heard numbers from "30% Funded" to "80% Funded".

Answer: 100% Funded should be the goal. For example, if you have a 30 year roof that costs $90,000 to replace, you should reserve $3,000/year to be 100% Funded. Reserving anything less will produce a lower level of funding that will have to be made up in the future by others that shouldn't have to pay it. Having a goal of 100% Funded insures that all members pay their fair share. Understand, however, that it is impossible to maintain 100% at all times since large expenditures can draw reserve down dramatically in any given year. The funding plan should anticipate these draw downs and adjust annual contributions to build up reserves again. The main issue is to avoid funding by special assessments which are unfair to most that have to pay them.

Question: Our governing documents have policies regarding tree cutting and clearing. From time to time, the board gets requests from lot owners asking permission to cut a tree because of fear that it will fall on the house. If there is no disease or damage, we deny such requests. It has been suggested recently that the HOA can be held liable for damage and injury from falling trees.

Answer: The HOA is certainly liable for failing to maintain trees in the common area and should have a regular tree maintenance program to keep trees trimmed, healthy and safe. Trees located on private lots is another matter. If an owner maintains a tree is in danger of falling, it should either be obvious to a casual observer or be documented by an arborist. The board should make prudent decisions based on reliable information and safety concerns.

There is also a fire hazard presented by trees that are closer that 30 feet to the structure, especially if they are highly flammable like pine trees. If an arborist believes they are a danger, they should be removed.

Question: Our HOA has extra parking spaces which are first come/first serve. There are several residents which park extra vehicles and boats there long term. This doesn't seem fair.

Answer: If the HOA has extra parking spaces, it should not allow any resident to commandeer them, especially for no cost. These are revenue generating assets which can be rented long term at market rate. In many urban settings, a reserved parking spot is worth $50 or more a month. The board should charge market rent on a yearly basis. This way, parking revenue benefits all HOA members by helping reduce HOA fees.

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  About the author, Richard Thompson

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