As Community Association Managers, we have experienced some interesting economic times in the last several years. The slump in the economy has placed a real strain on everyone, including the Homeowner Association sector. People are deciding which bills they are going to pay first: “Am I going to pay the mortgage or pay my HOA assessment bill?” The HOA bill typically goes to the bottom of the pile. This shifts the financial strain from the individual homeowners onto the HOAs themselves (think about the compounding effect of a number of non-paying homeowners within one HOA), forcing the HOAs to tap into reserves. In many cases they are depleting these reserves completely, leaving no wiggle room when trying to tackle unexpected projects or disasters that come up, let alone the regular monthly bills. This is a frightening reality for many associations today.
There are several keys to making sure that you are doing everything you can to recover the funds that homeowners are failing to pay to the association:
- Staying in constant contact with the association’s attorney is critical. Even though they may say they are handling your collections, issue frequent email communications just to make sure things are not going off track.
- Only send over the amount of accounts you can afford. If you send every delinquent homeowner over to the attorney at once, you may end up over depleting your funds. As each account is collected and you have received the money for these accounts, send one or two more over to the attorney.
- Have your HOA board set a consistent collections policy. Most attorneys suggest an outside cap of two years for filing liens and three years for filing suit - because after four years you cannot collect due to statute of limitations.
- Work with the attorney on some kind of deferred fee or advanced contingency plan. Both of these actions typically charge the attorney’s fee back to the homeowner and keep the financial burden away from the HOA.
- If the homeowner asks for some kind of payment plan, have the board accept a plan that is reasonable enough for the homeowner. Six or twelve months are typically considered to be reasonable payback periods.
- If the homeowner asks for a settlement, see if there are any fines on the account that can be removed, especially if all violations have been corrected. Since fines are circumstantial and may not survive a court challenge, this becomes a great bargaining tool. Homeowners see this as an act of good faith on the board’s part. Not only will you collect your money, but positive public relations make this a win-win situation.
Besides collections, review your community expenses and see what can be cut. A prime area is landscaping. If you can get away with not using the landscaper during the winter months, then do so. Tall grass is the biggest landscaping eyesore and since grass does not grow in the winter… Shutting off the sprinkler system, especially during the winter months is another way to cut expenses.
These are just a couple of the many ways you can tackle financial woes when your HOA hits financial lows. Some associations that were completely “broke” a few years ago now have tens of thousands of dollars in the bank. It can be done – Don’t give up hope! There are solutions and as always, Access Management Group is here to help.