The Stonecrest Initial Assessment Proposition
An Example of Flawed Reasoning
An Opinion By Larry Stoever
Published February 18, 2023
The Stonecrest Property Owners Association is a 2,224-unit development located in southern Marion County and is currently within a few lots of build-out. To maintain adequate reserve funds for infrastructure repairs and replacements, the Board had Reserve Studies completed in 2020 and 2022. The 2022 Reserve Study determined that reserve contributions needed in 2023 to meet anticipated infrastructure costs had increased by $221,100 or 60% since the 2020 Reserve Study. The 2022 Reserve Study also projected that additional increases of $20,000 a year would be needed for the following three years. The increase in reserve fund requirements was almost entirely due to the increased cost of asphalt for scheduled road resurfacing projects.
In response to the need for increased reserve funds, the Board increased monthly assessments by 12% for 2023. The Board also appointed an “Initial Assessment Committee” to investigate imposing an assessment on home buyers to help offset future increases in the monthly assessments needed to meet reserve funding requirements.
The reasoning for an assessment on home buyers is that they “inherit” the reserve funds that were contributed by the seller and should therefore pay an additional amount to utilize Stonecrest amenities. And that the additional revenue should be used to offset the cost of monthly assessments for the other Stonecrest homeowners who helped pay for existing amenities.
The Committee is currently considering an “initial assessment” of .033% on the purchase price of a home. As the average selling price of Stonecrest homes in 2022 was $303,113, the average cost of the proposed assessment would be $1,000. However, due to the wide variance in Stonecrest home prices, the assessment would range from $600 or less to more than $2,000. Supporters of the “initial assessment” have reasoned that a major selling point for home buyers is that by paying the proposed assessment they will be rewarded with lower monthly assessment fees thereafter.
The reasoning for supporting an initial or capital assessment on home buyers is flawed. Home buyers do not inherit anything when they purchase a home within an HOA, other than the value of the home they are buying. And a home’s value in an HOA is based on the value of the home including the amenities the homeowner is entitled to use. The real beneficiary of home sales is the HOA. Based on the most recent 2021 Stonecrest audit, homeowners leave unobligated funds of $1,663 per unit to the POA when they sell their home. If the proposed initial assessment is imposed on a home purchaser, the total contribution of the home purchased would be on average $1,000 more than the current unobligated reserve contributed by unsold homes.
The reasoning that home buyers will benefit from lower monthly assessments is also defective. Based on 2022 home sales of 163 units and an average home price of $303,113, the proposed assessment of .033% would have resulted in a maximum reduction of $6.10 in monthly assessments. If the same level of home sales continued year after year, It would take about 13 years to recoup the average $1,000 “initial assessment” (with 0% interest). HOWEVER, the proposition cannot require all future boards to use “initial assessment” revenue to offset monthly fees. And it’s almost certain that there will be wide fluctuations from year to year in the number of home sales and average selling price.
As mentioned, the reason the Board is seeking additional revenue is due to the sudden increase in in reserves needed due to the increased costs of road construction projects. The 2022 Reserve Study included $2.7 million in proposed road improvement projects over the next five years. However, the current road resurfacing schedule was proposed by a committee several years ago without professional engineering assistance. As Stonecrest roads are generally in excellent condition, a more reasonable approach would be to re-evaluate the proposed road improvement schedule with professional engineering assistance before imposing further increases in assessments.
As I’m not an attorney, I won’t comment on the legality of an initial or capital assessment on home sales, but I believe it’s unlikely that a Florida HOA has unlimited authority to impose either a percentage or flat fee on the resale of homes.
Additional assessments or fees on the sale of homes in an HOA are unfair to home buyers and may result in lower home selling prices. As such, this may be a matter for Florida HOA’s that impose capital assessments or fees on home sales to reconsider.
One of the selling points our Board has used is that the Association’s attorney and auditor have said there are other Florida HOA’s that have imposed a capital or initial assessment of fee on home sales. In response the attached letter was sent to Governor Ron DeSantis.