Help me understand my RURAL homeowner's association?

August 1, 2018 11:05 AM

I live in an incredibly rural subdivision with an HOA. The HOA seems to exist only to pay for our sewer system and we've never been given any info about it other than here's your bill, pay it. I'm running the financial numbers they've handed out for last year and I'm seeing...issues. Help me parse this out?

We live in MO, if that's helpful. I've looked at my state's laws and statutes regarding HOA's but I'm not finding much that pertains to anything outside condos. Our subdivision is 10 houses down a single, dead end gravel road.

We've owned this house for 2 years and previously, rented in this neighborhood for 3. During those first 3 years the homeowner's paid the monthly $55 HOA dues. When we bought our house, we weren't given anything regarding how the HOA works or what it does really -- we were friendly with everyone in the neighborhood and I think no one here really thinks about it. It's just another monthly bill.

That said, as far as I can tell, our $55 monthly dues seems to cover the subdivisions sewer / water treatment plant (it's incredibly small).

We were recently given the financials for the 2017 FY and I'm running the numbers and finding issues. Each monthly statement doesn't equal up to what the treasurer of the HOA details in the year end statement. Explanations aren't given for things being paid for. Some examples:

- Expenses for electric for (I'm guessing) the treatment plant is overstated by $155.
- "Environmental" fees is overstated by $500.
- Water labs expenses are overstated by $600+.
- In February of this year there were expenses for "water fees" of over $1000 but I can't figure out what that might be since fees to the water company are accounted for elsewhere.
- There are other fees paid with no mention of what they're for. Just random company names. Keep in mind, we don't get any benefit (that we can tell) from this HOA other than the operation of our sewer treatment plant.

The HOA has over $20 grand in the bank and brings in $500 more than what is needed to cover expenses every month.

I was also under the impression that our HOA is registered as a non-profit -- the original articles of corporation filed with the state agree here -- but I'm not finding any 990s filed. Would this be necessary? I'm fairly well versed in non-profit filings and law but this has left me confused.

I'd like to point out the incorrect math / accounting here but I thought I'd query the hivemind first -- am I missing something? Why the need to collect $55 dues monthly when far less would cover expenses and still leave money in the bank? Is there some THING I'm not getting about how HOAs work?

Thanks in advance for any help you can offer!

(Just want to note, this is a seriously rural area, population about 1000, spread out over the countryside. This is nothing like a city or less rural HOA, I'm assuming.)

posted by youandiandaflame to Home & Garden (11 answers total)

Why the need to collect $55 dues monthly when far less would cover expenses and still leave money in the bank?

You may well be right about the numbers being off generally, but...frankly I doubt $20K in reserves is enough if they're required to physically maintain a sewer system! (Which it sounds like they are?) When you're funding infrastructure, you must think not only about meeting monthly expenses but about the inevitable major structural work that will come about at some point.

You don't need to file 990s if you're not claiming tax exemption. Not all non-profits are tax-exempt. Are you sure the HOA is?
posted by praemunire at 11:10 AM on August 1, 2018 [10 favorites]

Are the other "water fees" to the town/county/state? E.g. in my area we have a separate town assessment for stormwater fee.

I also agree that $20k is not going to do it if something really bad happens or when the deferred maintenance finally catches up. You are not just paying for current expenses, you are sinking funds for capital improvements down the line. But that should be made explicit - maybe you should be treasurer next!
posted by epanalepsis at 11:12 AM on August 1, 2018 [4 favorites]

I don't know about the accounting but 20K in reserves doesn't seem excessive to me; the HOA will eventually need to replace things like pipes, pumps and your field any of which will make a big dent in those reserves (EG: a simple single family home septic field here costs $10K).

Finally if ten homes are paying $55/mo but you are still clearing $500 a month something is wrong. The person doing maintenance and testing is worth way more than $50 a month even if the testing was free.
posted by Mitheral at 11:17 AM on August 1, 2018 [4 favorites]

The reserves are for repairs and upgrades. $20k is a laughably small amount, I'd be much more worried that they don't have enough to cover repairs not that they are over charging. I plan on saving $250 a month over time to cover repairs and upgrades on a medium sized house

I'd suggest contacting them and joining the board or attending some meetings to learn more or to get questions answered.
posted by fshgrl at 11:17 AM on August 1, 2018 [5 favorites]

To help calibrate, I was on the board of a community pool that was owned by members and it was literally just a pool, the pumps and a changing room and we had more than $20K or reserves in the bank.

That said, the rest of the expenses need to be explained by the person who puts the financial statements together. The summarized financial statements are all fine and good but without morei nfo they're not that useful.
posted by GuyZero at 11:44 AM on August 1, 2018

Your HOA should have at the very least articles of incorporation, and beyond that a CC&R, and beyond that, perhaps bylaws. These documents control what the HOA can do and how they do it. You should have received these when you bought your house. In some states they are even part of the deed, but I don't know about Missouri. If you didn't get these as part of closing, request them from the HOA.

In my experience, having too little in reserve is more dangerous than having too much. There is a real risk of an emergency requiring an expensive and immediate special assessment and right now, it doesn't seem like you know the rules for assessments at all. Or when can they raise your HOA fee and by how much? Do they publish minutes so you can go back and read discussions on if there is a reserve Target and how the HOA fee was determined?
posted by muddgirl at 11:52 AM on August 1, 2018 [2 favorites]

Does the HOA maintain the gravel road? That was the only expense of the very rural neighborhood association where I grew up.
posted by hydropsyche at 11:53 AM on August 1, 2018 [1 favorite]

we don't get any benefit (that we can tell) from this HOA other than the operation of our sewer treatment plant.

In that case, it may not be an HOA but a M.U.D. (Municipal Utility District) or whatever the State of Missouri might call it. Sorting this out may go some ways to aiding your understanding.

An incorporated entity like this will be run (albeit sloppily, it appears) by a Board of Directors. At the very least, the Board is required to have an annual meeting. That would be the place to get your questions answered.
posted by John Borrowman at 12:23 PM on August 1, 2018 [5 favorites]

With the benefit of the previous posts, I'd suggest that if there are only 10 homes involved in this, you'll only have to knock on 2 or 3 doors at the most, before you find someone who is either the Treasurer, or another member of the Board, or who knows where to find one of those people. Since you're friendly with your neighbors you can surely ask them what they know about this.

As a member of the HOA, you should have the right to inspect its records upon reasonable request.
posted by JimN2TAW at 12:38 PM on August 1, 2018 [3 favorites]

In that case, it may not be an HOA but a M.U.D. (Municipal Utility District) or whatever the State of Missouri might call it.

This occurred to me, too (and would, I think, explain the non-filing), but there's such diversity of local practice on such matters that I didn't suggest it.
posted by praemunire at 12:39 PM on August 1, 2018 [1 favorite]

I would also not assume that a year end report covers a calendar year or even 12 months. Many of ours cover an extra half month on the end and they start and end variously depending on which level of government you are dealing with.
posted by fshgrl at 12:59 PM on August 1, 2018