CAI supports the elimination of any requirement that community association documents prohibit the increase of assessments by the board of directors above a fixed percentage without approval of a vote of owners.
Community Associations Institute (CAI) supports a community association’s board of directors’ discretion on assessment increases and favors governing documents that do not restrict a board’s ability to raise assessments.
Traditionally, the U.S. Department of Veterans Affairs and other regulatory authorities have required that governing documents for community associations prohibit the increase of assessments (also known as common charges or common expenses) by the board of directors above a fixed percentage without approval by a vote of the owners.
Despite this, CAI does not favor these restrictions. Assessments, by definition, mean all of those expenses of administration, maintenance, repair and replacement of the common elements or common property, as well as other necessary expenses. Accordingly, many statutes and most governing documents provide express authority to the board, in its sole discretion, to determine the amount of money for assessments. Assessments’ increases should be based upon a board of directors’ prudent estimate of the funds necessary to meet anticipated expenses for the benefit of its association. The board, not a third party public or governmental agency, has the fiduciary obligation and is in the most informed position to manage the finances of its own private community. Finally, a board decision to raise assessments also directly impacts each director who is also an owner responsible for the increased fees.
When governing documents restrict the board’s ability to raise assessments, this may compromise the effective administration, maintenance, repair and replacement of the property, causing the project to fall into disrepair or ruin. The restrictions may also hamper the community’s ability to find other means of financing, such as borrowing. As a result, individuals may experience loss of property value, making units unmarketable. A board cannot fulfill its fiduciary obligation if it does not possess the unhindered discretion to raise assessment fees in accordance with its community’s particular needs and to meet its statutory and legal duties. Ultimately, owners have the power to influence the financial direction of an association through the election process.
CAI recommends that members actively lobby to uphold express language in statutes and governing documents empowering boards to raise assessments without subjecting that authority to an owners’ vote or otherwise restricting this discretion in any way.