Lydia Estates Homeowners Assoc., Inc.

Payment of Annual Assessments:

Sep 26, 2006

Payment of Annual Assessments (The association is required to collect the necessary assessment for maintenance of its common areas and other operating expenses):

Homeowners are required to pay their annual assessments at closing and each year thereafter. If there is confusion over what was paid in the year of closing versus the subsequent year, one should be able to get an answer from their closing agent. The following is provided as an assist in understanding the process:

1) When one purchases a home in Lydia Estates and as part of closing, the following is paid to the association: (1) a $250 Capital Contribution; (2) a $25.00 processing fee; (3) the prorated annual assessment for the year of purchase; and (4) the prorated capital contribution for the year of purchase. For the following year and every year thereafter, the full amount of the annual assessment and capital contribution is due in full. Note: For prorating purposes, the assessments & capital contributions are both effective January 1st each year. However, while the assessment is due January 1st, the capital contribution is not due until July 1st.

2) Operating Fund:

a) This fund covers expenses that are directly related to the annual operation of the Association. Examples include:

i) Maintenance of the recreation area, brick walls; ponds; wetlands; gates; security cameras; perimeter lawns & landscaping; irrigation; cleaning of restrooms; road repairs, etc).

ii) Office supplies, utilities (water, electric and phone) any management company fee, insurance, taxes, accounting/CPA services, etc.

b) The developer did not raise the
assessments from 1997 through 2000 and only 5% during 2001. The assessments levied were not enough to cover all the expenses. Each year the developer paid the shortfall of several thousand dollars from his other resources (we do not have that luxury). Therefore, increases each year to account for inflation (e.g., material, labor costs) and to gradually reach the level where a shortfall for this fund does not exist can be anticipated. These increases (typically 5%) must be planned for in terms of one's personnel finance and can be anticipated for the foreseeable future.

3) Capital Fund:

a) The Capital fund pays for future road paving and dredging of ponds (i.e., large expenditures that can be anticipated & planned for in the out-years). The roads, for example, will cost over $200,000. The capital fund only had $21,000 at the end of 2006.

b) To expect everyone to pay a significantly large special assessment, at time of need, appears unrealistic and is speculative. Therefore, the projected need must be paid for over the years so the money is available when needed. After control was transferred to the homeowners (2003), the owners voted whether to increase the assessments to cover this cost, knowing that for each year the increase is delayed, the annual catch-up amount would grow. In May 2003 & 2004 (no vote in 2005) the owners voted not to fully fund our capital budget. In 2006 the homeowners voted to partially fund the budget through an annual capital contribution (approximately 25% of the projected need). The solution for the other 75% is at this time outstanding, although dollars will be rolled over from the operational fund when possible.

4) Unpaid assessments and capital contributions are akin to property taxes in that they result in liens against one's property and may lead to foreclosure. The lien includes the assessment, interest and late fee, legal and other costs of collection. Timely payment ensures avoidance of these additional charges; potential forfeiture of property; and a negative credit history. Buying into this community legally requires us to pay for the cost of maintaining our common areas, along with other expenses, and to share that cost equally. If an owner did not pay, they would in essence be transferring their obligations onto the backs of the remaining homeowners.