As HOA Start-up Budgets are being created, a question we hear often is “can the dues be reduced?” More often than not, the HOA dues in the early phases are higher simply because of the way the development has been mapped.
One big item that impacts the HOA dues in the early phases is quite simply that the common area lots are too large. Unfortunately, this is something that should be addressed when the tentative subdivision map is drafted and approved. Drafting the tentative map with multiple common area lots for each common area element or amenity is very helpful to phasing and budgeting. For example, the private street may be 3 acres large, but is created as a single common area lot. This forces annexation of the single lot in one phase.
Another example is the open space lot. We recently had a development that included over 100 acres of open space, which was designated as one lot. All 100 acres had to be annexed into the HOA at one time.
For condominium developments and multi-unit buildings, it is helpful to cluster the common areas associated with the buildings, rather than grouping the common areas into larger segments. An example of this would be common driveways serving a cluster of lots could be broken into separate driveway lots, for ease of phasing and annexing.
Sometimes, the common area budgeting is just higher than desired but can be reduced with some thoughtful construction planning.
- Drought tolerant plantings represent not only water cost savings, but they are also usually less expensive to maintain
- Cement should be considered for more than sidewalks; roller compacted concrete paving requires less maintenance and is a quarter of the cost of asphalt long-term repair and reserves
- Using cementitious fiberboard for wood siding can reduce the paint reserves by 1/3 and often can make an impact on fire insurance
- Tile or metal roofs are a fraction of the cost to maintain than composition shingle
- Duplex dwelling units can be set up for owner maintenance, rather than through the HOA. A separate “Duplex Declaration” can be recorded to address specific maintenance requirements to be shared between the two owners involved.
When large common areas are included in the early phases of a development, the Developer is often forced into offering a Subsidy arrangement in order to reduce the dues. An alternative may be a maintenance agreement, where the amenity is held by the developer until a later phase, but under this approach, the subdivider must pay for the operation of the amenity, as well as pay the associated reserves for long term replacement. Both operating and reserve funds must be guaranteed by bond or other deposit with escrow.