In this week's tip, we unpack a news report about a Missouri condo community that has increased assessments and imposed special assessments several times in the past several years, essentially doubling owners' fees.
One owner's assessment jumped from $273 last year to $402 in January. That's on top of a $1,738 special assessment imposed last December. Yet another assessment is planned, spreading out over nine months starting in July. It'll result in a monthly fee of $830 for
those months.
The board cited foundation work plus increased insurance costs as the reasons for its actions.
Our experts disagree on whether this board seems to have a strong financial plan or is in a reactive mode. Each pulls out clues from the news report to reach their conclusion.
"When I first read this, all the important stuff came to mind," states Daniel J. Miske, CCAL, a partner at Kaman & Cusimano in Milwaukee who represents 800 associations throughout Wisconsin at any given time.
"For instance, how much did this community have in reserves before these increases?" he asks. "Did you have a reserve study so you know how much money you need? It may be that this community still doesn't have much money.
"Based on the fact that owners were paying $273 in assessments, it sounds to me like the board was underfunding from the beginning," says Miske. "Unit owners never see it that way. They're often of this opinion: ‘I think I should pay next to nothing because we have 80 of us paying.' But the key question is how much money is needed.
"It sounds to me like owners might be jumping to conclusions that somehow these costs are a bad thing," says Miske. "But odds are they finally have a responsible board looking at the numbers and that this money is needed. Or it could also be that they have a new board like the prior board, and the new board is doing only what they need
to do to survive—and this process will continue because they continue to fail plan ahead.
"I hope it's the former situation," he notes. "But if you don't have a reserve study and don't know what you're doing, how do you manage your budget?
I don't know."
Danielle Wang, of counsel at the law firm of Sands Anderson PC in Williamsburg and Richmond, Va., and the leader of its community associations team, also worries this board hasn't yet gotten ahead of its
problems.