In my 12-year career as a community manager, I couldn’t venture to guess how often I’ve heard a homeowner say, “But, we can’t afford an increase in maintenance fees.” Some board members do their best to not increase monthly assessments annually. Unfortunately, the end result is not always what they set out to achieve.
‘Tis the season… not talking Christmas, rather budget season. The last week in July or early August is the time each year when community managers receive their budget packages from the accounting department. These packages are loaded with informative tools for use in developing next year’s budgets for the communities.
Community managers will work, research and analyze, but all too often they hear, “But this says we need to increase the monthly fees.” There may be several reasons for a board to disagree with an assessment increase. Some board directors feel if the monthly fees are increased, they may not be re-elected at the next annual meeting. Perhaps, they want to keep the monthly fees low because they personally don’t want to pay higher fees. Still others may want to keep the fees the same as the previous year to help their neighbors who can’t afford to pay more.
One of the most difficult parts of preparing a budget for communities is trying to break through that way of thinking and to educate board members on why it’s a good idea to increase the monthly fees for their communities. Board members don’t always agree that an increase is needed, even when they’re shown that historically, the financial reports support an increase.
Years of paying the same assessment amount without increase leaves a community and its homeowners vulnerable. While the monthly assessment fee remains the same over the years, the cost for capital projects and repairs do not – they increase. A low assessment fee may make monthly budgeting easier for homeowners, but what happens when homeowners are faced with a large assessment notice because the community does not have the needed budget or reserve.
For example, in my former community, I received notice of a pending special assessment for roof replacement. Although I paid monthly assessments, I received a special assessment notice of close to $10,000. One neighbor approached me and said, “When I was on the board, we kept the fees low and never had special assessments like this.” Little did he know that, that way of thinking is what led to the large special assessment. If it wasn’t poor planning, it was probably poor advice or maybe both.
For the good of the community, monthly maintenance fees or assessments should be increased each year, even if it is only to factor in the inflation rate for reserve accounts. By maintaining adequate or fully funded reserves, the community is poised to face the future with certainty. It’s true, you may not really be able to afford those low monthly fees after all.
Jane Jarlenski, CMCA, AMS, PCAM
Director of Management Services
Rampart Properties, Inc. AAMC