Raising HOA fees goes best when the board can show the numbers behind the increase, stays inside the limits set by its governing documents and state law, and tells owners early. An increase that is documented and explained is rarely popular, but most owners will accept it. One that appears as a surprise on a monthly statement can cost the board trust for years. The eight tips below cover how to justify, decide, communicate and phase in an increase, and the last section is for homeowners whose fees are going up.
Why assessments go up
An association has almost no income other than what owners pay. When insurance premiums, utilities, landscaping contracts or repair costs rise, assessments are the only place the money can come from. Holding dues flat while costs climb does not save owners anything. It moves the bill to a later date, usually as a special assessment or as maintenance that was skipped and now costs more. If your board is unsure which kind of charge fits the need, start with the types of assessments and when each one applies. Our HOA accounting guides cover budgets, reserves and collections in more depth.
8 tips for raising HOA fees the right way
1. Build the budget first and let it produce the number
Do not start with “how much can we raise dues?” Start with next year’s costs, line by line, using signed contracts, renewal quotes and the last twelve months of actual spending. The increase is whatever closes the gap between those costs and current assessment income. A board that works this way can answer any owner’s question with a document. Our guide to planning your HOA budget walks through the process.
2. Use the reserve study as evidence
Operating costs are only half the picture. The reserve study tells you what the roofs, paving, pool equipment and other long-lived components will cost to replace and how much should be set aside each year. If reserve contributions have lagged, say so plainly and show the funding plan. A reserve specialist can update the study if yours is out of date.
3. Rebid and trim before you ask for more
Owners will ask what the board did to control costs, so have an answer. Get competing bids on the largest contracts, review insurance options with your agent well ahead of renewal, and look for cosmetic projects that can wait a year. Be careful about what you postpone. Delaying new clubhouse furniture is a budget choice. Delaying a roof repair or a safety fix usually costs more later and can create liability.
4. Check the rules before the board votes
Your CC&Rs and bylaws, along with state law, decide how an increase can be adopted. Look for three things: any cap on how much the board can raise assessments without a member vote, the notice owners must receive, and any deadline tied to the annual budget. An increase adopted the wrong way can be challenged, and fixing it later is far harder than getting the steps right the first time. Ask the association’s attorney if the documents and the statute seem to disagree.
5. Compare the ways to close the gap
A higher regular assessment is not the only tool. Lay out the options side by side:
- A regular assessment increase, which spreads the cost evenly across the year and fits recurring costs.
- A special assessment, which fits a one-time project but lands hard on owners with tight budgets.
- A phased increase over two or three years, which is easier to absorb but leaves a shortfall in the early years that has to be covered.
- A loan, which spreads a large project over time and adds interest and lender requirements.
Put the per-home cost next to each option. As an illustration, a $36,000 annual shortfall in a 100-home community works out to $30 per home per month. Owners respond to that figure far more than to a percentage.
6. Decide in an open meeting and record the reasoning
Put the budget and the proposed increase on the agenda of an open board meeting, let owners comment, and have the minutes show what the board reviewed: the draft budget, the reserve study, the bids and the alternatives considered. That record shows the board acted on information and in good faith, which matters if the decision is ever questioned.
7. Tell owners early and use plain numbers
Send a short letter with the budget rather than letting the new amount speak for itself. Cover the new monthly amount per home, the date it starts, the three or four costs driving it, what the board cut or rebid, and what happens if the association does not fund the need. A town hall or a question-and-answer session before the vote gives owners a place to be heard. For more ideas, see giving your community members a voice.
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8. Phase it in where you can and plan for hardship
Small increases every year are easier on owners than a large jump after years of flat dues, and they keep the budget honest. When a larger increase is unavoidable, give as much lead time as you can. Decide in advance how the board will handle owners who fall behind, and apply that policy the same way to everyone. Our article on late fees and notices covers the collection side.
In California
California’s Davis-Stirling Act sets specific rules for assessment increases. This is a summary, and the linked statutes control.
- The association must levy regular and special assessments sufficient to perform its obligations, and it may not charge more than is necessary for the purpose of the assessment (Civil Code 5600).
- The board may raise the regular assessment only if it has complied with the annual budget report requirements of Civil Code 5300(b) for that fiscal year (the budget, reserve summary and reserve funding disclosures), or has the approval of a majority of a quorum of members at a meeting or election. Without approval from a majority of a quorum of members, the board may not raise the regular assessment more than 20 percent above the prior fiscal year’s, or levy special assessments that total more than 5 percent of that year’s budgeted gross expenses. For this purpose a quorum is more than 50 percent of the members. The same section has separate limits for deed-restricted affordable units in newer developments (Civil Code 5605).
- Those limits do not apply to an assessment increase needed for one of three emergency situations: an extraordinary expense required by a court order; an extraordinary expense needed to operate, repair or maintain the development where a threat to personal health or safety, or another hazardous condition or circumstance on the property, is discovered; or an extraordinary expense needed to repair or maintain the development that the board could not reasonably have foreseen when it prepared the annual budget report. In that last case the board must adopt a resolution with written findings and send it to members with the notice of assessment (Civil Code 5610).
- Owners must receive individual notice of any increase in regular or special assessments at least 30 and not more than 60 days before the increased assessment is due (Civil Code 5615).
- The annual budget report goes to members 30 to 90 days before the end of the fiscal year (Civil Code 5300).
If you are a homeowner and your fees are going up
You have more options than paying and complaining.
- Keep paying the full amount while you ask questions. Falling behind can lead to late charges and collection action, and it weakens your position.
- Read the budget and the reserve study summary the association sends. They usually show what is driving the increase.
- Ask the board, in writing or at an open meeting, how the number was reached and what alternatives were considered.
- Check that the board followed the steps in your governing documents and state law, including any cap and notice period.
- Offer specifics. A second bid for a contract or a volunteer for a committee helps more than a general objection.
- If you still disagree, talk with your neighbors, use the member rights in your bylaws, or run for the board at the next election.
If the new amount is a real hardship, contact the board or manager before you miss a payment and ask whether a payment plan is available.
This article is general educational information, not legal, financial or insurance advice. Laws vary by state and your association’s governing documents control many of these questions, so check with your association’s attorney, accountant or insurance professional about your situation.