K.M. from Fairfield County writes:
Dear Mister Condo,
I live in and serve on the Board of a modest-sized shoreline HOA community in Fairfield County that was established in the 1950s. Our neighborhood has always been very close with many of our residents born here, schooled here, and raised here. The past few years have seen escalating costs slowly erode the camaraderie of the community with many homeowners crying foul over increased HOA dues. Admittedly, dues have almost doubled in the past seven years but so hasn’t the insurance on the community clubhouse and the cost to keep the playground in good order. We can’t even afford to have the parking lot and road leading to the clubhouse replaced even though it desperately needs to be done. At a recent association meeting, one of the owners suggested it is time to dissolve the association because he can’t afford to live here any longer. I am at wit’s end of trying to keep the homeowners happy and keep the community maintained as is my job as a Board member. Do you have any ideas?
Mister Condo replies:
K.M., escalating costs are a burden to community associations everywhere. The fact that yours have doubled in the past seven years does not surprise me and really doesn’t tell me anything about the community other than it is possible that seven years ago the fees were too low. Low fees are popular but, as you can attest, the community suffers in the long run because it cannot afford to properly maintain itself without raising fees or placing special assessments on owners.
In my opinion, the real problem is communication and transparency. Since your community is an HOA, there is very likely a charter and documents that detail the association on file with your city or town. You would do well to get yourself a copy of that document and see what the charter has to say about fees and the responsibility of the association. Chances are the original fees were quite small. Of course, things cost a heck of a lot less in the 1950s. Homes have likely increased in value at a far greater pace than the common fees have increased. You certainly can’t pave a parking lot or build a clubhouse for what you could in the 1950s. It is even more expensive than it was 6 years ago, let alone 6 decades!
The Board should develop a list of all of the common elements that the association is responsible for. This includes tangible items like roads, parking lots, clubhouse, recreation equipment and whatever else is included for HOA members to use. It should then look at all of the other expenses of the association. This will be items like insurance, taxes, property management fees, etc.. The common elements that will wear down over time (they all will) should have a dollar value assigned to them based upon the likely usable life of the element. For instance, if the parking lot should last 25 years, take the cost and divide by 25 to determine how much is used each year. If you determine that your common elements are worth $100,000 and have a 25-year lifespan, then it is reasonable to budget $4,000 per year towards their inevitable replacement. If you have another $10,000 per year in management fees and insurances, then the association needs to raise $14,000 per year to make ends meet. Divide that by the number of HOA members and you arrive at your annual dues. So if I assume you have 100 homes in your HOA and each pays 1% of the budget in fees, then the annual common fee would be $140.00. This is very simple arithmetic and easily understood by your residents. However, if you simply tell homeowners that their fees are going from $70 per year to $140 per year without this type of detailed explanation, don’t be surprised if they call for your head on a platter.
The bottom line is that life in Connecticut is expensive. Life along any of our beautiful shorelines is even more so. There are less expensive places to live but if you expect to live in a flourishing shoreline community, you should expect there to be a cost to doing so. As long as that cost is explained and justified, HOA residents should not be surprised. And if they truly can no longer afford to live there, at least they will have the opportunity to understand what has caused the increased expense. Best wishes!