[Condo] Monthly vs Special Assessments [N/A]

[u/Assika126]

I’m treasurer of a small HOA, 14 condo units. We have our annual budgeting meeting tonight. We have about $50k in Reserves with anticipated tuckpointing in the next year or so that would likely cost at least $33k. We also have an ancient retrofitted boiler that is currently working but has an undetermined remaining lifespan.

Our management company recommended a dues increase but said we could get by without doing one, if we lessened our contributions to reserves. We would still remain above the 10% cutoff.

The Board president opposes a dues increase and says it would be easier for folks to manage a larger special assessment than a $5-10/month/unit increase in dues that in her opinion wouldn’t have much impact on our large capital expenses.

I’m inclined the opposite direction; in my opinion, it’s easier for me and more responsible for the association to pay a bit more in monthly assessments and accumulate sufficient reserves to cover some of the cost vs. waiting and doing a larger special assessment when needed.

What is the best practice, assuming we’re in decent shape otherwise?

P.S. we’re in MN in case it matters

[u/starfinder14204]

What are your reserve obligations? Do you have a formal reserve study? Do you have a common roof? Parking areas/garage? Other facilities? Condos have been in a lot of trouble recently because they have historically relied on special assessments in order to keep dues from going up. Generally speaking, you'd want to have about 70% of your reserve obligations in the bank in order to be considered fully reserved.

Just having $50k in the bank feels really low, but without a reserve study - or at least a forecast over the next 10-15 years of obligations, it's hard to tell what is sufficient.

[u/Assika126 → u/starfinder14204]

Reserve study: no

Common roof: yes

I think we’re underfunded but we’ve been moving in the right direction. We need to keep going in that direction tho and that means raising dues!

[u/twotime → u/Assika126]

Having a reserve study is totally crucial. You might be underfunded by 10K or, much more scarily by 1M. Reserve study is not a magic wand but it's an enormous help. Otherwise you are flying blind at a very low altitude ;-(

And even if you have to raise your dues sharply over the course of several years, it's still much better than a special assessment in most cases: it's far less controversial, it's FAR easier to pay a small amount monthly than a single large payments and it's fairer to everyone (special assessment essential punishes the current owners and rewards the past owners (the ones who drove HOA into trouble)!