By: Arthur Cooper
Submitted: 2011-02-16 22:12:33 | Word Count: 664
For seniors looking to continue living on their own but in an environment that is less maintenance, and less about daily home duties than living, Florida is known for leading the country in providing easy to live in senior communities. For those who haven’t been in the ‘common living area’ market for sometime, you should be aware of Homeowner’s Associations, and the role they play in governing the community, and the costs involved. The general idea behind a homeowners’ association (HOA) is that you have a group of people elected by the residents who make up the board directing the homeowners association. The main duties are to:
1) Represent the best interests of the residents of the community especially in the capacity of protecting home values through the implementation and enforcement of rules, known as covenants and restrictions and
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2) To assess and collect homeowners’ fees to help pay for the upkeep of common areas of the community as well as any other areas provided for in the covenants and deed recordings.
It’s important to understand how this entire works when you’re looking at Florida retirement communities. Homeowner’s association dues vary widely depending on the amount of amenities that are provided to the homeowners. Some just cover the maintenance of the common areas including medians, right of ways, lakes, and ponds. Other dues can cover things such as upkeep of the streets (if they are private streets), and streetlights. Some communities negotiate for a group rate on cable TV or Internet access with service providers.
You may be charged fees for those services monthly, quarterly, or yearly. Failure to pay your homeowner’s dues can result in the association placing a lien on your property and eventually foreclosing if you get far enough behind on your payments.
As a prospective purchaser in a community, you are entitled to and encouraged to review the HOA Budget. When deciding whether a homeowners’ association’s dues are a good deal or not, add up what you think it would cost you to obtain the services provided on your own. Don’t forget the aggravation the association saves you by not having to deal with finding and scheduling the services and vendors yourself.
If you are buying a home in a new subdivision where homes are still under construction, odds are that the developer still controls the homeowners’ association. Until control of the HOA is given to the resident owners, called turnover, which the state of Florida requires to occur when 90% of the units in a community …
Since most 55 Communities in Florida have HOA’s it’s important to understand the HOA budget. Below I have provided a sample Florida HOA budget for an imaginary community, so don’t spend too much time wondering how or where they came from. The point was to simply let you see what a proposed budget might look like when you are looking at a community with an association, be it a homeowners’ association, or a condo association. A budget that you are given could have more expense categories or it could have less, depending on the level of services provided. Regardless of the budget format, there are three things that you will want to look for whenever an actual budget is placed in front of you.
First, look at the Developer’s Contribution. In the case of the sample budget provided, it is $105,000 in 2007. It’s important to know how much the developer is kicking in to keep the HOA in the black. By doing some quick and dirty math, you can determine how much your dues might increase after the HOA turns over to the residents. In this case, simply take $105,000 divided by 150 (current number of homes) and you are left with a $700 budget shortfall for each home. Divide $700 by 12 to get the monthly amount of $58.33. In theory (keep in mind these are all imaginary numbers), your dues would be $58.33 higher per month, post turnover than they actually are right now.
The next item to look at is the projected Loss at Buildout. In the example, this figure is $40,000. You can also use this figure to determine how your dues will be affected. Take $40,000 divided by total number of homes (200) and you come up with a $200 budget shortfall. This amounts to $16.66 extra per month that each homeowner would have to pay.
Last, but not least, take note of the “Reserves for Replacements”. In the sample budget, these reserves are grossly under funded. A good reserve fund should account for at least 10 to 20 percent of an association’s annual operating budget. If it takes $480,000 to run each year, then the reserve fund should be at least $48,000. The reserve for replacements fund is there to pay for things like the repair of streets (if they are private, usually in a gated community), a new roof for the clubhouse, the resurfacing of the swimming pool, and other items that will come up after a few years of wear and tear. It is very important that it be well funded and maintained.
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