When you buy a home in a covenanted community, you will receive a copy of the Covenants, Conditions and Restrictions (CC&Rs) along with your closing documents. The CC&Rs will spell out all the regulations (rules/conditions) and the amount of Homeowner’s Association (HOA) fees, which are typically paid monthly.
Each year the HOA’s Board of Directors meet to discuss and set the budget that will include how much every household (property or unit) will be charged for their monthly fees. The budget should include a breakdown of projected expenses and known assessments, a summary of the reserve and funding plan and explanation of the procedures used to calculate. If an assessment is anticipated, an estimated amount, commencement date and duration should be included. The association’s property, general liability, flood insurance policies are typically included as well.
Generally, the HOA monthly fees each household will pay are broken down to cover two areas:
1) Operational. These operational expenses are monies to cover the community’s costs such as landscaping and maintenance, snow removal, pool and/or recreational area maintenance, insurance and water costs.
2) Reserves. Typically, the HOA will place the remaining portion of the monthly HOA dues into a reserve that will be used for long-term repairs and replacements. These areas can include repaving of the roadways, pool repairs, replacing fences, or building additional recreational or parking areas - or to cover a catastrophe.
Unfortunately not all Board of Directors budget enough money to cover higher-than-expected operational costs or an unexpected occurrence. An HOA budget should include the probability of a homeowner(s) not paying their dues and legal fees.
The HOA board can’t predict a catastrophe. A flood may mean building a retaining wall. Not all natural disasters are completely covered by insurance. The recent hailstorm near Denver destroyed hundreds of roofs. If most the roofs in an HOA community needed replacing, the reserves may be depleted quickly.
Most HOAs have the power to place a special assessment when there isn’t enough money in the Operational or Reserve budget. An assessment may be placed on each HOA homeowner as a one-time fee or spread out in payments. Typically the board has the power to impose smaller special assessments and to determine the payment schedule. Some governing documents require owner approval when the assessment is a certain percentage of the total budget. Assessments can be in the thousands of dollars.
The HOA can place a lien on the homeowner’s property if the homeowner hasn’t paid the monthly dues, or any assessment. Once the lien is on the property, the HOA may foreclose on the property as permitted by the CC&Rs and pursuant to state law. A homeowner in this position should consult with a qualified and experienced HOA Defense Attorney as soon as possible. A experienced Foreclosure Defense Attorney can also help.
Gantenbein Law Firm, located in Denver, Colorado, has experienced attorneys in both HOA issues and disputes and in foreclosure defense and are well-known to be leaders in the areas of HOA Law, Real Estate Law & Colorado Foreclosure Defense. To schedule a consult regarding these issues call 303-618-2122.
Gantenbein Law Firm is also experienced in the following areas of law: Tax Law; Business Law, Probate Law, Wills & Trusts; Estate Planning; Credit Dispute and Repair. For more information regarding these areas of law, visit www.gantenbeinlaw.com.