Assessment Increase Limitations
A community association is, at its core, an organization that operates to serve the needs of and obligations made to its members. Community association board members have an obligation to uphold the contracts established with homeowners as set forth in the community’s governing documents, maintain the association’s common areas and common property, protect the health and safety of community members, and maintain the financial stability and long-term value of the association. The primary source of income for these entities is through the imposition and collection of assessments paid by homeowners within a community to maintain common elements.
An Association’s Board must retain reasonable discretion to adjust assessments as needed to effectively manage the community. Such decisions are made thoughtfully and are based on several factors, including but not limited to: the need to conduct or update reserve studies; the obligation to maintain adequate reserve funding to perform ongoing preventative maintenance to minimize long-term costs, cover increases in operating or insurance expenses; or perform unplanned corrective maintenance and repairs to common areas to ensure the health and safety of the community. The urgency with which an association must address an unplanned corrective maintenance or repair project varies depending on the specific project.
Recognizing that a board’s decision to adjust assessments is never made arbitrarily but rather based on in-depth knowledge of community finances and operations with consideration for all parties affected, Community Associations Institute (CAI) supports a community association’s board of directors’ reasonable discretion on determining appropriate assessment levels and favors governing documents that empower a board to raise assessments when necessary.
About the Community Association Housing Model
While community associations come in many forms and sizes, all associations share three basic characteristics: (1) membership in the association is mandatory and automatic for all property owners; (2) the community association governing documents bind all owners to defined land-use requirements administered by the community association; and (3) all property owners pay mandatory lien-based assessments that fund association operations.
The community association housing model is actively supported by local government as it permits the transfer of many municipal services and costs to the association and homeowners. Today, many community associations deliver services that once were the exclusive provenance of local government typically funded by local property taxes.
Community associations are governed by a volunteer board of directors or trustees elected by their homeowner members. The elected board guides the Association and its members by governing the community, ensuring maintenance needs are met, managing the finances of the Association, and any other items outlined in the Covenants, Conditions, and Restrictions (CC&Rs).
BACKGROUND
Much like local, state, and federal governments collect taxes to fund public services, projects, maintenance, and programs, community associations collect assessments to fund association services and programs. Community association assessments typically cover costs including:
- Insurance and risk management.
- Reserve studies and funding.
- Critical safety and structural integrity issues.
- Management and administrative services or staff.
- Routine and preventative maintenance and repair of common areas (gardens, parking lots, parks, shared roofs, etc.).
- Landscaping.
- Clearing debris after storms, snow removal, sidewalk salt, etc.
- Security.
- Garbage collection.
- Street lighting.
- Amenities (pool, tennis and pickleball courts, golf course, exercise room, etc.).
- Social activities.
Depending on the association, assessments may be paid monthly, quarterly, bi-annually, or annually. Associations count on all owners to pay on time and, when necessary, rely on strict collection processes that comply with the requirements of governing documents, statutes, and the Fair Debt Collection Practices Act.
An association’s annual budget, a legal document prepared in accordance with applicable statute or association governing documents, determines the annual assessment and should account for factors such as rising costs of operations, insurance, inflation, and adequate reserve funding.
Owners typically have the right to review the financial documents of the association and to ask the board of directors where their money is being spent. Associations often distribute the annual budget at or prior to an annual meeting or make it available on the their websites or through an online portal or mobile app. Information on association assessments can be found within Community Association Living: An Essential Guide for Homeowner Leaders.
Association governance should occur at the lowest possible level. Over the past several years, CAI has observed a trend of state legislators introducing bills that would limit the amount or percentage by which an association may increase assessments for homeowners. Legislation arbitrarily constraining HOA boards from increasing assessments needed for operations and capital projects, limits the board’s ability to plan adequately for community needs. This constraint may increase the risk of special assessments to meet needs due to lack of adequate income needed to finance and meet those needs.
For a community association to flourish, members must trust that the board will act prudently, consistently, and in the association's best interest. Board members are elected by the community and should be empowered to adjust assessments as necessary to cover maintenance costs and financial obligations. Transparent decision-making is essential for building and maintaining trust and confidence in the board's judgment.
PUBLIC POLICY
The board of an association, not a third-party public or governmental agency, has the obligation and is in the most informed position to manage the finances of its own private community. It is essential for a board to retain the discretion to increase assessments when reasonably necessary to fulfill its obligations in accordance with its community’s particular needs, including association CC&Rs, and to comply with applicable laws.
Transparency and accountability are critical in a community association. Associations’ adopted budgets, financial records, and governing documents should be accessible to all owners upon reasonable request or in concert with the association documents. Boards have processes in place to appropriately make and execute decisions affecting community finances. Decisions should be properly documented in a community’s minutes that are accessible to all owners and which can assist owners in answering questions relating to the community’s finances.
Many statutes and most governing documents provide express authority to the board of an association, in its reasonable discretion, to determine the assessments. Assessments’ increases should be based upon a board of directors’ prudent estimate of the funds necessary to meet all current and anticipated expenses for the benefit of its association.
When state statute or governing documents restrict the board’s ability to raise assessments, this will compromise the effective administration, maintenance, repair, and replacement of the property, causing the project to decrease in value. The restrictions may also hamper the community’s ability to find other means of financing, such as borrowing. Association members may experience loss of property value, increased health and safety risks, decreased satisfaction with communities and the boards that run them, overall confusion, or other negative consequences.
RECOMMENDATION
CAI opposes state law that provides for an arbitrary annual assessment increase cap.
CAI supports policies that enable community association board members to fulfill their duties by granting them the reasonable discretion to adequately assess the association and budget for its needs.
CAI supports state law that differentiates between assessment increases and special assessments levied by an association board.
CAI supports state laws that require budget transparency for community associations by making copies of adopted budgets and supporting documentation accessible to all owners.
CAI recommends that members actively advocate for state legislatures to uphold express language in statutes and governing documents empowering boards to adjust assessments for health, safety, and required repairs, without subjecting that authority to an owners’ vote or otherwise restricting this discretion in any way.
Adopted by the Executive Committee, April 10, 1983
Amended by the Board of Trustees, October 7, 1983
Amended by the Public Policy Committee, October 6, 1993
Adopted by the Board of Trustees, October 9, 1993
Approved by the Government & Public Affairs Committee, December 13, 2011
Adopted by the Board of Trustees, January 26, 2012
Approved by the Government & Public Affairs Committee, September 9, 2025
Adopted by the Board of Trustees, September 30, 2025