Essential Elements HOA Assessments Need to Cover
Assessments vary from one homeowner association to another. Why? Because every community has different common elements, amenities, different insurance needs, etc. Many Board members struggle to define all of their obligations so they aren’t blind-sided by huge repair bills. While there’s no one-size-fits-all reference list, knowing some of the essential elements can help your Board determine if your assessments are on track.
The association is responsible for maintaining common elements in the community. Identifying both long-term and routine maintenance and repairs is critical to developing a solid budget. Consult your governing documents as you prepare an itemized list to ensure that you have everything covered. Short-term maintenance is the daily or seasonal maintenance that the community needs to run smoothly (i.e., recreational facilities such as swimming pools, tennis courts, playgrounds, walking/running paths and fences. In addition, regular maintenance needs include building exteriors, balconies, landscaping, streets, signs, parking lots, lights, sidewalks and trees.
An HOA or condominium association must also save money for long-term replacements and repairs of comment elements. These can include roofs, roads, parking lots, clubhouses and/or other common buildings, entrances, elevators, building exteriors, pool, fences, etc. Some of the items appear on both lists because you have routine maintenance as well as future replacement. Consult your reserve study to make sure that your assessments reflect the updated costs for replacements and repairs. Almost everything has a “life”, so your Board must have a plan to keep your association running smoothly.
One common mistake is that Boards fail to plan adequately for natural disasters. While we experience fewer of these losses in Knoxville and Tri-Cities, Tenn., it’s still important to know and plan for insurance deductibles. This is an excellent time to review your insurance coverage to make sure that your community is sufficiently insured.
Some communities cover utilities such as trash, security, termite/insect treatments, cable and water as well as electricity for common areas. It’s also easy to overlook auditing, insurance, legal fees and other expenses that you pay occasionally. A good way to make sure you don’t accidentally omit an item that your assessments need to cover is to review both your expenses for the past 12 to 18 months and your reserve study.
When you have an itemized list of your association’s current and future obligations, simple math determines if your assessments adequately fund both. If you find that they don’t, you need to increase your assessments. While raising assessments is often unpopular, every homeowner we’ve encountered has always favored a managed increase over a surprise special assessment.
Wise Property Solutions is a property management company serving East Tennessee with offices in Knoxville, TN and the Tri-Cities, TN-VA. Specializing in Condominium Association Management, Home Owners Association Management, HOA Management and Gated Community Association Management.