The Value of Assessments

The Value of Assessments

An effective investment strategy includes understanding the reason for expenses related to the venture. With any property related portfolio, one of the costs that generally enlists a collective groan is the homeowner association assessment.  Understanding how the HOA assessment adds value to your property is important. Knowing how the HOA has been a central component in maintaining neighborhood home values could help when it comes to writing your next assessment check.

Part 1 of our 2-part series will focus on the history of associations.

History

At the time the developer was putting together the project plan, a discussion occurred with the city or county staff.  That discussion included what part of the infrastructure would be built and maintained by the developer and what part of the infrastructure would be built and maintained by the municipality.

Consider this, if a developer is able to shift the costs of road maintenance to future homeowners and remove it from city responsibility, the city will probably be pretty happy and willing to work more effectively with the developer.  This is only one of the reasons that homeowner associations exploded on the scene in the 1980’s and 1990’s and why they continue to thrive today.  Water and sewer lines will normally always be serviced by the city. But the streets, and sometimes sidewalks, those water and sewer lines are buried under will be paid for by the owners of each home via an association assessment.

The idea of using the HOA to manage more specific elements of the community also became more robust in the 1980’s and 1990’s. Just compare the CCR’s from a community built in 1972 (10 pages including AOI) to the CCR’s of a community built in 2002 (84 pages not including AOI).  A close inspection will show that HOA Rules and Regulations developed around case law, health codes and natural neighborhood concerns.

In addition to deciding that residents were not going to be allowed to park a semi-truck on the lawn or add unpermitted garages to the property, the enhanced CCR’s clearly defined what was considered a common element, limited use common element or owner responsibility.  In better defining both rules and elements, it became easier to create accurate and specific homeowner assessments.

There’s a simple way to think about HOA assessments. When the next assessment check is due, consider that you’re paying your part to keep the streets you drive on, or the gate you drive through, or the elevator you ride in, maintained to the best possible standards.

The Value of Assessments, Part 2
A Short Term Rental Case Study