CC&R's for a residential property we're interested in state that there's a capitalization foundation fee of up to 3% if we were to sell the property.

Is this generally negotiable?

They also state that yearly assessments can increase at up to 20% per year and the max increases by 20% even if not assessed. Does that sound reasonable? Math says that by the letter of it, fees could be absolutely bonkers in 10 years.

Edit: Foundation fee, thanks dallas!

What state?

Texas

State law caps actual increases at 10%. On the increase part, they seem to be in violation of the law in multiple ways.

That is really high for a capitalization fee. Most developments have it as a one-time fee of equal to the current dues level. It is usually paid for by the builder.

Foundation Fees are a different story. Most spell out the cap and a certain level in their CC&Rs. I have seen a cap anywhere from .5% to 1%, 3% would be an outlier. The current owner can request minutes of the Foundation or Property Owners Association depending on who is in control of the fees collected. This would show if it has been waived in the past. I doubt it has been.

dallasiteinsa02 said:

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State law caps actual increases at 10%. On the increase part, they seem to be in violation of the law in multiple ways.

That is really high for a capitalization fee. Most developments have it as a one-time fee of equal to the current dues level. It is usually paid for by the builder.

Foundation Fees are a different story. Most spell out the cap and a certain level in their CC&Rs. I have seen a cap anywhere from .5% to 1%, 3% would be an outlier. The current owner can request minutes of the Foundation or Property Owners Association depending on who is in control of the fees collected. This would show if it has been waived in the past. I doubt it has been.

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Sorry for the ignorance on my part. It's a foundation fee, didn't know the correct term. Language says up to 3%. Would there be a document showing prior fee percentages and could a prospective buyer get access to it?

On the increases, here's paraphrased actual language:

"...Assessment shall be $2000 starting in 2015. In 2016, it may be increased an amount not to exceed 20% over the prior year's assessment. For example, if the max prior year assessment was $500, but the actual assessment was $300, then the maximum assessment for the following year may be $600 ($500 x 20%), despite it not being assessed..."

The first statement seems to contradict the second.

Even 10% is...whew.

MSpeed said:

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dallasiteinsa02 said:

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State law caps actual increases at 10%. On the increase part, they seem to be in violation of the law in multiple ways.

That is really high for a capitalization fee. Most developments have it as a one-time fee of equal to the current dues level. It is usually paid for by the builder.

Foundation Fees are a different story. Most spell out the cap and a certain level in their CC&Rs. I have seen a cap anywhere from .5% to 1%, 3% would be an outlier. The current owner can request minutes of the Foundation or Property Owners Association depending on who is in control of the fees collected. This would show if it has been waived in the past. I doubt it has been.

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Sorry for the ignorance on my part. It's a foundation fee, didn't know the correct term. Language says up to 3%. Would there be a document showing prior fee percentages and could a prospective buyer get access to it?

On the increases, here's paraphrased actual language:

"...Assessment shall be $2000 starting in 2015. In 2016, it may be increased an amount not to exceed 20% over the prior year's assessment. For example, if the max prior year assessment was $500, but the actual assessment was $300, then the maximum assessment for the following year may be $600 ($500 x 20%), despite it not being assessed..."

The first statement seems to contradict the second.

Even 10% is...whew.

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Does it not spell out the starting level of the fee when the lot was encumbered? To just spell out the cap is not well written by their attorney. They should be able to produce minutes that give the history of the original establishment of the fee percentage and then it changes over time. Not sure about the enforcement ability if they have just given the cap and not established a starting percentage. That may be a glaring hole in their documents.

On the assessment, this is probably a violation of the cap that came about in about 2012.

These documents seem to be drafted by a lawyer that doesn't specialize in POAs.

Here's it is, pulled from a 2015 version of the restrictions I found on Google.

https://i.imgur.com/JEapkSy.png