Even the most well-run condo associations deal with the reality of raising fees. When it comes to raising dues for your condo association, it is not a matter of if, but when it happens. Most cost increases are predictable. It is the unexpected ones that can force raising fees out of pure necessity. Such situations make having adequate contingency funds advisable.
Homeowners association management operates on a sharing cost model. It is not unlike the concept behind NJ Condo Association Insurance, which shares the risk of devastating losses across a large pool of condo associations. Both concepts fulfill community members’ needs for professional management of their HOA business and sound protection from liability risks and property damage losses.
Are There Limits to Raising NJ Condo Association Fees Fees?
Your association needs to meet its annual budget, and sometimes increasing dues is necessary to meet its financial obligations. If an association cannot keep up with expenses or sufficiently save funds, a dues increase is inevitable. In general, there are no limits to how high the annual dues an HOA Association can charge.
The standard procedure builds safeguards into the program that keeps an association from raising dues too fast and too high. Often, limitations in the CC&Rs bind the association to rules by which they must abide. Covenant, Conditions, and Restrictions contracts (CC&RS) must be reasonably available to all community members. A typical CC&R limitation is to allow up to a 10% increase any year at the board’s will. Raises beyond the set annual amount require a vote by the community members.
What are some of the reasons behind a substantial increase?
- New roof or siding.
- Parking lot or private street maintenance.
- Install new HVAC units and air conditioners.
- Natural disaster causes considerable damage to community property.
- Operational expenses rise faster than expected.
- Common areas, outbuilding, and signage need routine repair or replacement.
- Need for new windows or doors.
- Suppliers and maintenance vendors pass along substantial increases in their business operations.
Plan and Communicate.
Having a plan for raising fees and communicating it to HOA members will not eliminate all complaints, but it will help to minimize them. Combining historical costs with accurate predictions for increases from vendors and other cost factors gives you a base. Use the information to gauge and explain your need for annual increases.
Is it better to rise 3 percent annually or ten percent every third year? Knowing how your community responds to rising fees and how your board manages HOA funds will help to inform your decision. In the end, unforeseen events can wreck the best plans, which is to say it’s a good idea to build flexibility into your strategies.
Conclusion
If your community is going to increase rates, there are ways you can prepare yourself.
- Have a team including board members, HOA management, financial advisors, and attorneys working on the operational side of the association. It is imperative for them to ensure the association stays in legal compliance when raising dues or making large expenditures.
- Establish a committee to help come up with the new fee schedule that benefits management and homeowners.
- Conduct and publish a survey of current price and market conditions to compare the association’s anticipated operating expenses. This action will keep all constituents up to date on the reasons why HOA fees are rising.
We recommend working with a professional NJ Condo Association Insurance expert. When adequately deployed, your insurance touches virtually every aspect of association business. At the Dickstein Agency, we bring decades of insuring HOAs experience to our clients. They use our expertise to determine if they are under or over-insured against losses across the entire HOA operation. As an independent agent, we have multiple markets to get you the best coverage at competitive rates.
About Dickstein Associates Agency
Dickstein Associates Agency has distinguished itself as a leading provider of personal and business insurance in the tri-state area for over 55 years. We pride ourselves on being advocates for our clients and providing them with quality and affordable coverages. As Trusted Choice™ independent insurance agency, we partner with various national and regional carriers, allowing for flexible and unbiased coverage for each client’s unique circumstances. For more information on how you can leverage all of your insurance to work best for you, and how we can secure the best insurance in the marketplace based on your specific needs and business objectives, contact us today at (800) 862-6662.
