When an HOA is created, the assessments are triggered 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. In a nutshell, Regulation 2792.16c stipulates that any assessments for costs or expenses for common area which has not been completed can be deferred – removed – from the budget.
To take advantage of this Regulation, The CC&Rs for the development must be drafted to include specific deferment of assessments provisions, and the HOA manager should be alerted to the provision. The provision can literally save thousands of dollars in assessments for projects where completion of HOA-maintained improvements are 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. The provision 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.
Following are a few simple real-life examples of developments where the deferment provisions have had a meaningful impact on assessments:
- A major recreation amenity was scheduled to be complete at a certain date, and the budget increased by $85 per lot at the time of completion. Completion was delayed, resulting in an $85/lot/month reduction in dues.
- When the HOA maintains the exterior and 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.
These are just a few examples of savings that can be gained through the use of Regulation 2792.16c. Since the Subdivider pays dues for unsold lots/units, the use of this provision can reduce carrying costs. If you are not sure how the Regulation can apply to your project, feel free to call us.