When Do Boards Raise Texas COA or HOA Assessment Fees?

It's a sentiment that resonates through every community—"please, no more fees." Whether you're in a high-rise, a single-family home neighborhood, or a sprawling master-planned community, chances are you’ve heard this concern about homeowners association (HOA) or condo owners association (COA) assessment fees.

However, let's be real—there are often solid reasons for adjusting those fees. Keeping them too low might mean you can't afford essential maintenance or handle emergencies. This could lead to a drop in property values and make your community less attractive. On the other hand, raising fees can actually boost property values and enhance your community's overall appeal.

So how do Texas board members determine whether to raise COA or HOA assessment fees? Let’s talk about what assessment fees are in the first place, what they cover, then look at a few different scenarios and factors to consider before increasing them.


 

What do COA or HOA assessment fees cover in Texas?

HOA and COA boards use assessment fees to address a variety of needs in their communities, depending on the type of assessment fee.  

Regular assessments, or "dues," are those predictable charges residents pay monthly, quarterly, or yearly. These cover everyday things like keeping up the landscaping, maintaining the pool, paying for utilities, and generally making sure the common areas look pristine.

Special assessments are extra fees that pop up for big projects or unexpected costs that homeowners’ regular dues alone won't cover. Think major roof repairs (beyond just wear-and-tear over time) for the clubhouse or fixing damages from a surprise storm that were not factored into the original budget for the year.


 

Can you raise Texas COA or HOA assessment fees at any time?

Regular assessments (dues):

Yes, your Texas HOA or COA board can raise regular assessment fees, but there are guidelines you must follow as board members. Typically, your association's governing documents—such as the Covenants, Conditions, and Restrictions (CC&Rs) or the bylaws—outline the process and limitations for increasing regular assessments.

In most cases, your board has the authority to adjust these fees within a certain percentage or dollar amount without requiring a vote from the homeowners. However, if the proposed increase exceeds the allowed threshold or significantly impacts the community's budget, a formal vote from the association's residents might be necessary.

Special assessments:

Since these assessments are levied when regular budget funds won’t cover unexpected costs, special assessments require a thorough review and approval process. Your board must communicate the need for the special assessment clearly to the residents, often through multiple communication platforms like open meetings and official notices.

In some cases, the homeowners may also need to vote on the proposed assessment, depending on the community’s bylaws and governing documents. This process ensures transparency and fairness, allowing the community to understand and agree on the need for additional financial contributions.


 

Why do boards raise COA or HOA assessment fees?

Regular assessments - Raising regular assessments is something HOA and COA boards don’t take lightly in Texas. Nobody likes paying more, but there are several reasons – and benefits – for increasing dues.

For starters, inflation is a factor that affects nearly everything, from landscaping services to utilities. So as the cost of maintaining your community goes up, your dues need to keep pace too. Another big reason is the need to fund essential maintenance projects. Keeping things like your pools, clubhouses, and playgrounds in good shape ensures they stay safe and enjoyable for everyone to use.

Additionally, your board may need to propose a COA or HOA assessment increase to build up your reserve fund. This fund is extremely important because it helps cover inevitable repairs and maintenance down the road.

As your community grows, there may be new amenities or improvements that need funding, like better security, updated recreational facilities, etc. These enhancements can make your entire community more appealing and each property more valuable.
 
Special assessments - Texas HOA boards generally levy special assessments in response to situations that require immediate and significant funding, which isn't covered by the regular budget. Some common scenarios may include:

1. Emergency repairs: If there is significant damage due to a natural disaster, like a hurricane or flood, that wasn't anticipated in the yearly budget, a special assessment may be necessary to fund essential repairs (especially if insurance does not provide enough loss assessment coverage).
2. Major renovations or upgrades: When substantial updates or major renovations are required for shared amenities like clubhouses, pools, or roofs, and these projects exceed the regular budget, special assessments can be used to cover the costs.
3. Unforeseen legal fees: Legal issues can arise that require substantial financial resources, exceeding what was budgeted. Special assessments may be levied to cover these unforeseen legal expenses.
4. Inadequate reserve funds: If the reserve fund, which is set aside for emergencies and significant repairs, is depleted or insufficient, a special assessment might be needed to replenish it and ensure the community can handle future unforeseen expenses.

 

What’s the difference between reserve funds and special assessments? When should boards use which?

First, your board should look at the urgency of an expense. Reserve funds are usually saved for planned maintenance and repairs, like fixing a community roof or repaving roads —things we know we'll need eventually. In other words, the reserve fund is like your association’s financial safety net. These funds build up over time from part of the regular dues paid by residents.

On the other hand, special assessments are for curveballs – the unexpected major expenses that aren’t covered by the regular budget. These could be big emergency repairs after a natural disaster or sudden legal fees the board didn't see coming. If the reserve funds aren't enough to cover these surprise costs, your board may need to set up a special assessment.

Another factor your board should consider is the overall health of the reserve fund. If the fund is in good shape, you might use it to avoid hitting residents with an unexpected special assessment. But if dipping into the fund would leave it too low to handle future emergencies, your board might decide a special assessment is the way to go instead.

See more on reserve funds vs. capital improvement funds here.


 

What are the pros and cons of raising regular assessments in Texas?

Before your board decides to raise assessments, you must weigh the advantages and disadvantages and how they’ll impact homeowners.

Pros:

1. Steady income stream: Regular assessments provide a predictable and steady stream of income to the HOA or COA, which helps in better financial planning and management of community projects and maintenance.
2. Preventing large, unexpected fees: By incrementally increasing regular assessments, associations can avoid the need for large, unexpected special assessments, which can be more jarring for homeowners.
3. Enhanced services and amenities: Gradual increases in regular assessments can fund continuous improvements and maintenance of community amenities, thereby enhancing the quality of life for all residents.
4. Building reserve funds: Higher regular assessments can contribute more to the reserve funds, ensuring the community is better prepared for unforeseen expenses and emergencies.

Cons:

1. Resident dissatisfaction: Frequent increases in regular assessments can lead to dissatisfaction among homeowners, who may feel burdened by the constant rise in their monthly or annual dues.
2. Economic strain: For some residents, increased assessments can be a financial strain, potentially leading to higher delinquency rates.
3. Approval challenges: Getting homeowner approval for regular assessment hikes can be challenging, requiring a lot of communication and sometimes extensive meetings and votes.
4. Short-term sacrifices for long-term gains: Sometimes, the benefits of increased assessments are not immediately visible, leading to initial resistance even if the long-term outcome is beneficial for the community.

 

What are the pros and cons of special assessments in Texas?

Special assessments come with their own mix of pros and cons that HOA and COA boards should carefully consider.

Pros:

1. Immediate funding: Special assessments can quickly generate the necessary funds to address urgent and substantial expenses, such as emergency repairs or major upgrades, ensuring that critical projects are not delayed.
2. Reserve fund protection: By levying a special assessment instead of using reserve funds, an HOA can maintain the reserve for future emergencies, thereby preserving the financial health of the community.
3. Targeted allocation: The funds collected via special assessments are often earmarked for specific projects, allowing homeowners to see exactly how their money is being used, which can enhance trust and transparency.
4. Community improvements: Special assessments can fund significant improvements that enhance the overall appeal and value of the community, making it a more attractive place to live.

Cons:

1. Financial burden: For homeowners, special assessments can be an unexpected financial strain, especially if the amounts are significant. This can lead to complaints and dissatisfaction among community members.
2. Approval process: Implementing a special assessment often requires a rigorous approval process, including homeowner votes and board meetings, which can be time-consuming and may not always result in the desired outcome.
3. Potential conflict: The need for additional funds can sometimes lead to disagreements within the community, as homeowners may have different opinions on the necessity and fairness of the special assessment.
4. Economic impact: Additional fees could increase the risk of delinquent payments among residents, ultimately affecting the association’s ability to manage and maintain communal areas effectively.

Careful consideration, strategic planning, and clear communication are essential when deciding to raise assessments. While it can secure financial stability and ensure your community's prosperity, it is important to balance these benefits with the potential financial impact on residents.

Your board shouldn’t have to make this decision alone. A seasoned property management company will ensure you have the right financial partner and insurance guidance on your side to give insight on when adjusting assessments will (or won’t) benefit your entire association.


 

Transparency with residents – COA or HOA assessment increases

Throughout this decision-making process, your board should prioritize transparency and effective communication with residents. You should explain why you’re choosing one option over another, usually during meetings or through official updates via multiple platforms. This is especially important if residents also get a vote, for instance, if it’s a such a large amount that your community’s rules require it.

Ultimately, the goal is to balance immediate financial needs with long-term stability, making sure both the reserve fund and special assessments are used to enhance property values and elevate the experience so everyone in the community can thrive.


 

Responding to residents’ complaints about assessment increases

Resident complaints are a normal part of the process. It’s only natural to expect some negative feedback from community members. However, many of these complaints come from a place of misunderstanding. Residents may not always see why they have to pay more to the association on top of all their other bills, like mortgage, utilities, etc.

To address this, your board members must remind their fellow homeowners what the dues are used for. Additionally, the board needs to inform residents of the increase well in advance. No one likes unexpected costs, so it’s critical to make sure residents understand why the fee increase is necessary. Whether it's due to inflation or other factors, thoroughly explaining the details of “why” can make a big difference.

Another effective strategy is for your board to show residents a detailed breakdown of the annual budget. Demonstrate how their money is being spent, whether it’s on amenity upgrades or new landscaping. Throughout the year, share the receipts for goods and services with homeowners.
Complete transparency and keeping residents involved in the decision-making process - especially regarding financial matters - is generally appreciated and can help ease concerns.


 

Conclusion

Though it may sound appealing to residents at first, keeping assessment fees stagnant or lowering them can actually decrease property values and heighten the risk of needing special assessments. Neither of these outcomes is ideal, so your board shouldn't shy away from raising dues when necessary.

And let’s face it - HOAs and COAs exist for a reason; there's a reason people choose to live in managed communities. Association dues ensure your property remains well-maintained, amenities are kept in top condition, and home values are preserved. Assessments are residents’ investment in the overall health and attractiveness of their community, increasing their property values over time, making it a more pleasant place to call home.