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On Thursday, March 12, 2015 3:14 PM, Christopher M. Tingey
Don, Cheryl and Denise:
I have reviewed the governing documents of the Association in response to an inquiry from Denise about the Board’s authority to institute a $100.00/yr. reserve fund contribution from each homeowner in order to bolster the Association’s reserve fund. It is my understanding that the need to institute the contribution is based on the reserve study recently performed and the needed reserve funds outlined in that study.
As your community dates back to the early-1970s, neither the Declaration nor the Bylaws require either a reserve account or a reserve study. So, until the Board decided to fund reserves and have a reserve study performed, none was technically required under ORS 94.595. The fact that the Board has chosen to have a reserve study conducted for the Association is a smart choice–one that I would have advised the Board to make–and allowed by ORS 94.595(5)(a)(A).
Now that the Board has had a reserve study conducted, though, the second question is how to fund the reserves. ORS 94.595(3)(a)(A) allows the Board to adjust the amount of reserve fund contributions, either up or down, based on the review of the reserve study. But, this is based on contributions made in the normal course of an association’s assessment model. That model is based on the language of the governing documents.
Some association’s documents fund reserves through a portion of the normal assessments as shown in a budget. Other association’s documents fund reserves through a separate reserve assessment spelled out in the governing documents.
With respect to Cross Creek, your documents contain both a regular assessment and a special assessment provision. The regular assessment provision limits assessments to $10/mo./lot (building site) unless a majority of all owners vote to increase that amount. (Decl., Art. IX(b)). That assessment has been increased to $240/year/lot (or $20/mo./lot) based on a vote of owners, but it cannot exceed $240.00/yr./lot without a further vote of the owners.
Meanwhile, the special assessment language allows for an assessment “[i]n the event [of] unusual circumstances . . . .” (Decl., Art. IX(f)). But, the special assessment amount is limited to an amount up to $25.00/lot (building site). Further, two-thirds of the members must vote in favor of the special assessment in order for it to even be levied, and it may only be done “in emergency situations of community wide crisis.”
The Bylaws do not add any authority to the Board’s ability to assess. The Bylaws simply defer to the Declaration language. (Bylaws, Art. VIII, Sect. 2(c)).
Taken together, my interpretation of your documents and the statute is that the Board can fund reserves, but it must be do so within the amount of your regular assessment cap. Alternatively, if the Board wants to fund reserves outside the amount of the regular assessment, it may only do so with a vote of two-thirds of the owners and only in the amount of $25.00/yr./lot, not $100.00/yr./lot. Further, any special assessment would have to be re-voted on each year.
In order to achieve your goal of assessing each lot $100.00/year for a reserve contribution, you would have to (1) have a vote of the owners increasing the regular assessment to $340.00/yr./lot, or (2) reduce your operating budget to account for $100.00/yr./lot being put into the reserve account, or (3) both increase your assessment some amount and reduce your operating expenses by the same amount to keep assessments below $340.00/yr./lot, while still allowing $100.00/yr./lot to be put into reserves.
In short, I do not believe the Board, by resolution, can institute a $100/yr./lot reserve contribution without owner vote, unless it is done solely within the confines of the $240.00/yr./lot regular assessment. Homeowner approval would be required for such an assessment to be made outside the scope of the regular assessment. Further, if it were done as a special assessment, the assessment would be capped at $25.00/yr./lot, and it would still require a vote of the homeowners before it could be instituted.
Please call or e-mail me with any questions or concerns.