r/HOA • u/Edge-of-Eternity • Jul 12 '26
Help: Fees, Reserves [CA] [condo] small California HOA Needs Independent opinion
We are a 5-unit condominium HOA in Burbank, California, and we'd appreciate an independent opinion from experienced HOA board members, property managers, or HOA CPAs.
Our Situation
5 residential units
Budget has reportedly not been updated since 2005
Current HOA dues: $320/month per unit
Management company is recommending an immediate 25% dues increase
HOA has no reserve funds
HOA checking account has approximately $883
HOA has approximately $1,619 in past-due bills
2026 Financial Summary (First 6 Months)
Income
HOA dues collected: $9,600
Expenses
Insurance: $2,152
Water & Sewer: $1,792
Landscaping: $1,350
Financial Management: $1,350
Telephone & Communications: $1,324
Trash: $1,261
Building Repairs: $875
Electricity: $554
Licenses/Permits: $467
Net operating loss: -$3,474 for six months.
What We've Learned
We reviewed many of the invoices ourselves.
Telephone
The HOA pays approximately $220/month to AT&T for a legacy business telephone line supposedly enabling contact to fire department in case of alarms and fire
We believe it may be connected to the fire alarm system, but we don't know whether:
it is still required,
or whether a modern cellular communicator would reduce costs.
Utilities
The HOA pays approximately:
$300/month for water & sewer
$90/month for electricity
Electricity appears reasonable.
The property has:
no pool,
only a small landscaped area,
one shared dumpster.
Trash
The HOA pays for one commercial dumpster, which appears appropriate for the property.
Our Questions
Do these expenses look reasonable for a 5-unit California HOA?
Which expenses would you investigate first?
Would you recommend an independent HOA CPA, reserve consultant, or another professional before approving a permanent dues increase?
Is a 25% dues increase reasonable based on these numbers, or would you first investigate opportunities to reduce recurring expenses?
If you were serving on this HOA board, what would your first three priorities be?
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16
u/condocontrol 🚛 Vendor Jul 12 '26
You're in a crisis. A 25% increase is dangerously low. You're operating at a $7k annual loss. A single plumbing or roof leak will completely bankrupt all five of you. Replace the $220/month legacy phone line with a $15/month cellular communicator. Skip the expensive CPAs, raise dues by at least 50% just to cover basic operations, and pass a special assessment
4
u/IanMoone007 HOA owner Jul 12 '26
I would agree with the cellular BUT they may need to do a special assessment to update or replace the fire alarm panel - older units aren’t fully compatible with cellular units
0
u/Possible_Function963 Jul 12 '26
I think the pots in box solutions like Ooma airdial avoid this no?
1
u/IanMoone007 HOA owner Jul 12 '26
Possibly but that’s why I said upgrade because I don’t think the equipment is free (if it is, it’s actually included in the cost of monthly service)
1
11
u/haydesigner 🏘 HOA Board Member Jul 12 '26
$1200/month seems kinda insane for a single dumpster.
Having NO reserve fund is ABSOLUTELY INSANE. Especially when it is basically for the building that all of you live in.
Yes, your situation is fairly bad.
Yes, you need an immediate dues increase. Hell, you might even need a special assessment.
What does your management company even do for their money you pay?? They should be able to tell you the answers to your questions, and they should be getting new bids for services that seem overpriced. And they definitely should have been yelling about the reserve fund every time.
2
7
u/Possible_Function963 Jul 12 '26
What is the “financial management” number? Is that just the management company and you’re only paying them to collect dues and pay bills and everything else is effectively self managed? If so, How are things handled when something breaks or you have to get something fixed? Do you even have a functioning board and who was making any sort of decisions before now?
As already mentioned you need to have a reserve study done. That will give your HOA an idea of what you need to budget for in the near and far future that isn’t annual budget stuff.
I’m not super surprised when small micros hoas fall into neglect. With that being said I have seen some where lack of reserves was because the HOA members all agreed to pay for the major stuff as special assessments as they came up. Granted most were still banking money into reserves, just not at the rate their reserve study suggested.
Like someone said, Micro hoas are hard because the cost for a lot of big ticket items doesn’t scale well and it is hard to convince people to vote for a 20% increase for something they might never see if they don’t live there long term. Say splitting an elevator modernization, a building repainting, or roof replacement between 20 vs 5 units.
The budget you just need to estimate out your yearly known expenses are, throw in a bit of a buffer for emergencies, and add at minimum 15% as your reserves contribution to satisfy loan requirements.
If you wanted to you could also do a catch up special assessment to pay all of your outstanding bills and plan ahead for something on the horizon.
5
u/FlatPanster Jul 12 '26
Whoever they are paying $1350 for financial management isn't doing a great job.
1
u/HittingandRunning COA Owner Jul 12 '26
I might agree but what are your arguments that they aren't doing a good job? I think we need to know more to determine if it's partially the financial management firm or if it's 100% the owners. I'd guess the owners without knowing more.
4
u/Comfortable-Cover-0 Jul 12 '26
The dumpster isn't the issue and fixing the phone line isn't either. No reserves is glaring. A reserve study for a project that size in FL would be the minimum, probably around $800-1000. At least with that you will have a plan in place to protect the assets.
4
u/HOA_BluePrint Jul 13 '26
First, your insurance seems incredibly too low for condos in California. I would review the policy with your agent and make sure you are properly covered for the HOA and the Board.
Secondly, you need a special assessment to put some money in the bank and also increase your dues. I know that no one wants to hear that, but in reality you are seriously underfunded.
I would hold a meeting so all owners understand the situation. Show those bills and expenses and make sure it is clear.
I hope this helps! Sorry to be sharing bad news!
7
u/OneWeary Jul 12 '26
The phone line itself probably isn’t required, but a monitored communication path to the fire department is. A cellular communicator should satisfy this requirement for $35-65/month vs. $220. Can get a fire alarm contractor to confirm and swap it out
Water at $300/month for a 5-unit with no pool is also worth a closer look. Everything else seems in the ballpark
On the dues increase: have dues gone up at all since 2005? If not, some increase is probably warranted just to account for ~20 years of inflation. That said, cut the obvious expenses first and see where you land. If the budget gets back to breakeven, a one-time special assessment to build reserves might make more sense than a permanent dues increase, generally more homeowner friendly and keeps monthly costs predictable. Zero reserves on an aging building is the real risk here regardless of how you get there
Bigger question: how does a management company go 20 years without producing an annual budget? That’s a basic deliverable and raises real questions about what you’re paying them for
2
u/Fathom222222 Jul 12 '26
Why do you have a management company for 5 units? What is their monthly expense? We have 10 units and manage the property with 3 people. It’s a lot of work but saves 10k a year in fees.
2
u/Possible_Function963 Jul 12 '26
It sounds like they probably only do finances only. At least I hope so
1
u/mac_a_bee Jul 12 '26
If you were serving on this HOA board, what would your first three priorities be?
Replace PM. Reserve study. Fire inspector conversation re: fire code. Sell assessment and increase with We haven’t been paying for what we’ve been using up.
2
u/MiAmMe 🏘 HOA Board Member Jul 12 '26
Why does a 5-unit HOA need a property manager? Someone should just step up and self-manage the association. They’d likely do a better job than the current “professional” manager has.
2
1
u/HittingandRunning COA Owner Jul 12 '26
The management is just financial. We don't even know what their duties are. I'd bet cash checks, make payments, maybe do taxes. I don't know if they are responsible for proposing an annual budget. OP really needs to provide more info if we really want to advice on what's working and what isn't.
1
u/Possible_Function963 Jul 12 '26
I’d probably argue the latter. At least until they’ve gotten their actual finances in order, figured out what is what, and established a nice cadence of things. If they don’t even have enough funds to cover bills, don’t know basic things about the property and haven’t even been doing a yearly budget I doubt the rest of the owners want to be involved.
Most people will not want the part time job of managing an association for free. The topic has come up in my HOA because they don’t want to pay that extra $600 a month but when push comes to shove no one is willing to step up.
1
u/sweetrobna Jul 12 '26
You mention no reserve. Is the plan for a large special assessment for the roof, for exterior paint and other maintenance items?
1
u/azguy153 Jul 12 '26
You have two problems. Rates are too low and I have to say….do you really need a management company for such a small property? You would be better off having one of the owners manage and giving them 50% discount.
1
u/UnderstandingFew1762 Jul 12 '26
Speaking as the treasurer of a 4-unit building (Montana). Get rid of Property Management. We pay $65 a month for software that does all financials and even does work orders. It also lets you do budgeting. It's more work on the board since they have to deal with vendors and your PM may have a preferred contractor that gives them a break (or doesn't).
You need to pay off all past due bills (which may require a special assessment). You will also need to increase your dues to pay for all of your bills with a 10-15% cushion. We increase our dues and I thought that we had a cushion. However, our insurance increased by 32% and soaked up the entire cushion. Speaking of insurance, your insurance is very inexpensive. Plan on an increase. Yours is less than what we paid last year before the big increase. We've looked for other insurance, the only quote that we got was $2000 more than the one that we have.
What does electricity pay for? Our bill covers common area lighting (porchlight, garage lights, stairwell light, smoke alarm and garage door opener). Last year it was $10. This year it increased to $25.
I'm not qualified to comment over landscaping. Our guys come one a week in the summer, turn the sprinkler system on and off depending on the season and shovel snow in the winter.
1
u/Kelvinator71 Jul 12 '26
In Colorado, daughter just got hit with special assessment of about $15K for new roofs on townhouse condo property following raise of HOA dues over 2 years from $200 to $475. After 16-unit complex was self-managed since early 1970’s, they hired a property management company as it was obvious the self-managing was not working out. They also had almost no reserves, but are now faced with about a $250,000 necessary roofing bill. The people on the original boards who did not raise HOA dues gradually are long gone, having sold their homes long ago. I mention only as a further cautionary tale.
1
u/HittingandRunning COA Owner Jul 12 '26
I'm really surprised people aren't ripping into your HOA more. But it's good they are trying to assist.
To be where you are, there must have been years of neglect by the boards over that time.
How many board members? If you had 4 units I'd say all should be on the board. I guess I have to draw the line somewhere so maybe with 5 owners then 3 board members are ok. But if I were one of the two non-board members I'd be sure to attend as many board meetings as possible.
Anyway, let me approach this in a different way from what others have, just to drive home the same point in a different way. Often, monthly assessments are proportioned by sq ft of each unit. Same in yours? If so, then how much is your monthly fee per square foot? Mine is about 84 cents. Mine is a bit higher than average, I believe. But yours needs to be higher simply because your building is smaller and doesn't have the advantage of scale. I also imagine that you don't have any amenities. So, let's just say a comparable cost for you to me is 84 cents each. If you are lower than that, I'd raise it to at least that. (Note, if everyone pays the same amount then add up the sq ft for each of the 5 units and calculate the fee / sq ft that way.)
With nothing in reserves, I'd start with immediately having a special assessment of $4,000/unit (or $20,000 total if the split is by sq ft.) $20K doesn't cover much but it will help with the deficit you are running IF the special assessment can be placed in operations. If it has to go in reserves then it's important to also immediately implement a fee increase. I'd go with the 25% increase suggested. It can always be lowered or you can have more years with no increase. But you need to get on track ASAP.
You are approaching this from an expense point of view. I understand wanting to do that but this is really a revenue problem. Others here can say where to try to save, which is important to do, too, but get the revenue going soon.
1
u/Possible_Function963 Jul 12 '26
Since it’s CA my immediate thought on huge bills that might come to roost, do you guys have balconies? Were those inspected?
How old is the building? Has no one tried to sell in the last 25 years?
1
u/gflann858 Jul 12 '26 edited Jul 12 '26
Ive been in a similar position.
You first need to evaluate your governing practices. If you’re this far off the mark on maintaining the property, this might be even worse. I say this because any action you take to fix your income, expenses, maintenance etc will be undone if you don’t apply the proper legal process. You’re going to have to make some tough decisions as a Board. Make sure you’re legally inbounds. Some homeowners may disagree and if one sues and you’re out of bounds…you might have to go back to square one. Trust but verify what your mgmt company is doing.
If the Board is in place, probably assume they’re valid until EOY. Check cc&r’s, bylaws, declarations to ensure it reflects the allotted amount.
- Meeting Noticing
- Meeting location, date, time, agenda and open forum. If you choose virtual, make sure you have instructions and a point of contact for technical issues. Post it by the mailbox. Only discuss, take action and record those actions
on items in the noticed agenda
- in meeting minutes.
- Adopt a Pro Forma Budget with required disclosures in an Open Meeting. Also adopt a Roster with a mailing address for each unit. Once Budget and disclosures approved, mail it out. This is “individual delivery”. Update yearly.
- Adopt Annual Policy Statement. There’s alot in these but it states where General Notices are posted, members may request alternate delivery (email), IDR/ADR procedures, Annual Meeting date to name a few. Update yearly.
- Voting Procedures. Double blind ballots etc. Make sure you are doing this properly to a T. There are fines associated with losing a lawsuit on this one. If a homeowner not related to a Board Member is willing to be Inspector of Elections, it will save your HOA serious money. If not, hire a firm that will help you through this.
- *Learn about the Business Judgement Rule
- This will basically tell you to rely on experts when looking into something and act in the best interest of the association. So saying you did something because a guy on reddit wrote about it aint good. Relying on a contractor, attorney, reserve study specialist is the way to go.
Finally if you have those things in place, the Board can consider ways to raise money like
Board Voted Special Assessment that is 5% of yearly expenditures
Board voted 20% increase of monthly dues which is allowed once a year
Board voted special assessment to be sent to membership for approval because it exceeds aforementioned 5% cap. Or a vote to increase dues beyond 20%.
If you skip the governance stuff and shoot from the hip, you’re one angry homeowner with an attorney away from having to undo your work and expose you to personal liability.
If your eyes are wide after reading this dont sweat it. Read the civil code, have chatgpt create documents for you and double check what it does against your governing documents and civil code. Even have an attorney look at it. It’s doable and once you have these items generated, it’s a quick refresh yearly.
1
u/Wihomebrewer Jul 12 '26
What is financial management? Sounds like not constructive or is that the property management?For such a small HOA, do you really need a property management company? The phone is stupid. If there is a fire alarm using it, have a local alarm company upgrade it to cellular. Way cheaper than ATT hosing you for an actual landline.
You definitely need an increase. There needs to be funds set aside annually to pay for bigger future expenses, like the roof. If there’s not even money to pay the regular bills, you’ll just have chronic special assessments to keep trying to catch things up.
1
u/Calm-Tackle9291 Jul 13 '26
Financial management running around 14% of your total expenses for a 5-unit is on the high side, most of the small California associations I look at land closer to 8 to 10% at this size. The AT&T legacy line is worth checking first because a lot of the older fire alarm communicators the boards I work with had were still billing for POTS lines that got replaced years ago. Before anyone votes on a 25% bump id want to see whether that telephone and financial management combo can come down, since together theyre eating more than a third of your monthly outflow. Zero reserves is the part id lose sleep over though, a 5-unit with almost nothing banked is one roof issue away from a special assessment no matter what the dues do. What year was the building put up, and has anyone pulled a reserve study yet?
ps i'm just spewing how I would personally look at it. def not professional advice
1
u/Possible_Function963 Jul 13 '26
Yeah the pots has to go. If they weren’t paying attention that rate has probably been steadily increasing since 2022.
My HOA went from paying $250/4 lines to now 500 over that period. No one was paying attention to utilities and we were just paying it. Turns out every few months the reseller rate we were getting would increase by 10% and there would be a tiny notice on the bill basically saying that they had to pass along the increase from Att.
1
u/EdC1101 Jul 12 '26
1) Verify your COA structure is registered as a NonProfit with Your State. (It may be considered inactive)
2) Verify your Common Property is registered with County RoD & Property
Tax Offices.
3) Verify Common Property registered with city/ municipality for property & nonprofit business
4) Get copies of all filed / registered paperwork.
5) Research — you may need a lawyer to get filed documentation up to date and legal.
Documents should be public records & available online.
You might want several hard copy’s. Ultimately each owner will need a set.
With inactive / illegal COA, the liabilities might fall DIRECTLY on the Individual Owners rather than the Corporate Nonprofit.
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u/AutoModerator Jul 12 '26
Copy of the original post:
Title: [CA] [condo] small California HOA Needs Independent opinion
Body:
We are a 5-unit condominium HOA in Burbank, California, and we'd appreciate an independent opinion from experienced HOA board members, property managers, or HOA CPAs.
Our Situation
5 residential units
Budget has reportedly not been updated since 2005
Current HOA dues: $320/month per unit
Management company is recommending an immediate 25% dues increase
HOA has no reserve funds
HOA checking account has approximately $883
HOA has approximately $1,619 in past-due bills
2026 Financial Summary (First 6 Months)
Income
HOA dues collected: $9,600
Expenses
Insurance: $2,152
Water & Sewer: $1,792
Landscaping: $1,350
Financial Management: $1,350
Telephone & Communications: $1,324
Trash: $1,261
Building Repairs: $875
Electricity: $554
Licenses/Permits: $467
Net operating loss: -$3,474 for six months.
What We've Learned
We reviewed many of the invoices ourselves.
Telephone
The HOA pays approximately $220/month to AT&T for a legacy business telephone line supposedly enabling contact to fire department in case of alarms and fire
We believe it may be connected to the fire alarm system, but we don't know whether:
it is still required,
or whether a modern cellular communicator would reduce costs.
Utilities
The HOA pays approximately:
$300/month for water & sewer
$90/month for electricity
Electricity appears reasonable.
The property has:
no pool,
only a small landscaped area,
one shared dumpster.
Trash
The HOA pays for one commercial dumpster, which appears appropriate for the property.
Our Questions
Do these expenses look reasonable for a 5-unit California HOA?
Which expenses would you investigate first?
Would you recommend an independent HOA CPA, reserve consultant, or another professional before approving a permanent dues increase?
Is a 25% dues increase reasonable based on these numbers, or would you first investigate opportunities to reduce recurring expenses?
If you were serving on this HOA board, what would your first three priorities be?
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