Homeowners associations’ dues

The Housing and Land Use Regulatory Board (HLURB), the government office that regulates land use, housing development and homeowners associations (HOA), recently issued guidelines on the dues, fees and contributions that HOA may collect from their members.

The collection of funds from residents of gated communities, housing subdivisions and residential condominiums is often a bone of contention between HOA officials and their members.

When millions of pesos are involved or HOA officials refuse to give up their posts and, in the process, lose their perks and privileges, it is not uncommon for the contending parties to file criminal and civil charges against each other.

The guidelines were issued to, among others, provide standards on the dues, fees and contributions that HOA may charge in order to eliminate unauthorized, excessive and arbitrary fees and assessments.

Depending on the bylaws of the HOA, the following financial charges may be imposed: Membership fees, association dues, beneficial user dues and special assessments.

Beneficial user dues are amounts charged to homeowners who may not be compelled to be members or members whose membership have been revoked; or owners and/or developers of subdivision or condominium projects who hold lots or housing units as part of inventory intended to be sold to the public.

Apparently drawing from its experience in resolving complaints about unreasonable or excessive dues and fees, HLURB listed and defined the items to be considered or included in the computation of the said amounts, namely, gross expense, gross area and rate base.

The rate base is the quotient from the division of the gross expense by the gross area to arrive at the cost per square meter.

Once these items are determined, “the charges per member or beneficial user shall then be computed by multiplying the total lot and floor area by the rate base, and an additional 10 percent for members or 20 percent for beneficial users to cover for any shortfall in collections resulting from the failure of some members or beneficial users to pay their dues, fees or contributions.”

For members or beneficial users who are delinquent in their payment obligations, HOA may impose interest and penalties on the unpaid amounts provided the add-ons are authorized by the bylaws and do not exceed 12 percent per year.

Aware of the litigious nature of our society, the guidelines allow HOA to make special assessments for a “legal defense fund” if their bylaws authorize them to institute, defend or intervene in any litigation or administrative proceedings that affect their welfare as a whole.

This assessment shall not, however, exceed the fees or costs stated in the retainer agreement between HOA and the lawyer, plus the costs of litigation.

The guidelines state that “suits filed by members or homeowners against the officers of the association involving the exercise of their powers as such shall be for their respective accounts.”

Although the phrase “respective accounts” is quite unclear as to which party it refers to—members or homeowners who filed the suit or the officers who were sued—it is reasonable to assume that the legal defense fund may be tapped by the officers if the cause of action arises from the performance of their duties.

It is interesting to note that, although the guidelines are supposed to relate to the collection of dues and fees, reference was made to a security practice that HOA routinely engage in.

The HLURB prohibits requiring “the driver of any vehicle entering the subdivision or condominium to surrender his/her driver’s license. The association is not authorized under the traffic laws to take custody, even on a temporary basis, the license issued by the Land Transportation Office.”

The association, members, officers, directors or trustees who participated in, authorized, or authorized this prohibited act may be ordered to pay a fine of up to P50,000.

In the light of security concerns, it is likely that this particular provision will meet stiff opposition, including legal action, from homeowners who have little faith in the ability of the police force to maintain peace and order.