Deferment of Assessments

When an HOA is created, the dues start in any phase when the first lot or unit is sold. For planning purposes, it’s important to note that the DRE Regulations allow for HOA assessments to be waived for HOA-maintained improvements that are not complete. Regulation 2792.16c, in a nutshell, stipulates that any assessments for common area which has not been completed can be deferred – in other words, removed from the assessment.

To take advantage of this Regulation, The CCRs for the development should be crafted with the deferment of assessments provisions, and the HOA manager should be made aware of the provision. This provision in the CCRs can literally shave thousands of dollars in assessments for projects where construction of HOA-maintained improvements is phased or delayed.

The regulation provides a list of examples but for HOA management and oversight the facts are simple: any costs for maintenance and reserves associated with an improvement that is not complete are erased from the HOA budget.  It also helps to avoid having to re-phase a development which, in addition to the obvious legal and engineering costs, takes up valuable time in the public report approval process.

We have several real-life examples of developments where the deferment provisions have had a meaningful impact on the development:

  • One development had a major recreation amenity that was scheduled to be complete at a certain date, and the budget called for a use fee to be paid for each and every lot until the amenity was conveyed to the HOA. Completion was delayed, so the monthly use fee was not collected from each buyer. The result was a $50/lot/month reduction in dues.
  • If the HOA maintains the exterior or roof of the dwelling units, the amounts owing for those elements can be erased for any buildings that are not completed.
  • Front yard maintenance costs only apply to the yards which are installed and complete.

Click here to see the Regulation.