Maintaining Reserve Funds
QUESTION: The condo Board has raised the condo fees 51% in the last 5 years. From one week to the other one they decided to increase from 5% to 10% for 2008 stating that the state of Virginia has a new law saying that the reserves needs to meet "x" amount. Is that true? Is there anything we the neighbors can do to stop the Board from raising the fees that much? Thank you very much! RESPONSE: The Virginia Condominium Act (Sec. 55-79.83:1) requires 3 things that each association must do with regards to reserves: 1. Conduct a reserve study at least once every five years. 2. Review that reserve study at least once every year. 3. Make any adjustments necessary, as determined by the Board.
This does not require any specific dollar amount to be put into reserves, and each association is different. Some have expensive clubhouses, pools, and parking lots that have to be replaced every 20-30 years from reserve money, and other associations may only have a sign at the neighborhood entrance. If you are concerned about your Board being too agressive with their reserve collections, ask to see a copy of the reserve study and current budget to see if the numbers make sense. While your concern with increased dues is natural, your Board's recent actions may be quite reasonably or even necessary. As condominium lawyers, more often than not we see examples of Boards that are hesitant (or refuse) to raise dues because it would be unpopular, even though any reasonable person could review the budget and see that the dues are obviously not high enough. Some Boards will even boast about not having raised dues for many years, not realizing that they're really doing a disservice to the Association in the long run. You should consider that your Board was well aware of how unpopular dues increases would be, and that the new dues were perhaps even less than what they wanted but that they tried to compromise as much as they could. If, on the other hand, it turns out that your Board is being way too agressive and that the increased dues aren't warranted, then your remedy as a homeowner is to gather support from the other owners to call a special meeting to have the directors removed and replaced with new ones (who can then change the assessments to whatever they feel is appropriate). The process for taking this action varies among associations, and you should check your Bylaws to see what they say about the topic. Greg Montero