We are in difficult economic times. The American economy hasn’t seen anything like this since 1929 and we probably won’t be out of it for several years. Homeowners associations, like the rest of the country, have entered a period of uncertainty, but more specifically, they have entered a period in which the joint account is running out. Foreclosures, layoffs, bankrupt developers, and owners who conserve cash by not paying appraisals, no matter which one, the bottom line is that less appraisals and a lot less cash are paid into the association’s coffers.
Collection actions are of little use when the owner is out of work and can barely feed his family. Homeowner evaluations are far below the priority list and what are the association’s options? Burn a link and foreclose? Then what? The lender has a senior bond and it is highly doubtful that there is equity in the property anyway. Small short claims? Sure, and you will get a judgment for unpaid evaluations quickly, but after that you must execute. Us what? The fact is, many homeowners see no value in continuing to pay a mortgage, let alone appraisals, on a condo unit that has absolutely no equity value. And you can’t garnish wages that don’t exist.
And now that? Now is the time to start prioritizing expenses. Who and what does a community association pay? What do you miss? Yes, that may well be the subject of an upcoming board meeting in many associations, so we could also address reality now. What is the most important obligation of the homeowners association? The health and safety of the owners, insurance. What threatens health and safety if not paid? Garbage collection? Yes. The water bill? Of course. The electricity bill for the common area? Yes, especially when there are elevators, hallway and hallway lighting. After that, we would put the security services and the premium payment into the fire and liability insurance premium. Management and accounting services come next so that there is someone to pay the bills that need to be paid. Contributions to reserves must continue with the remaining cash.
The items at the bottom of our list would be the gas bill for the spa or pool heater; some or all landscaping services; things like washing the windows and finally the cable bill for the clubhouse tv! Yes, most of this is obvious, but no board of directors has ever faced a situation like this and we want to assure you that massive cuts in services to accommodate a shrinking budget are not only legal, but would be a violation of Your fiduciary duty to sacrifice homeowners health and safety just to keep grass cut!
So consider what you will do as a board member when the cash runs out. Think about the personal safety of the owners first and you will usually make the right decisions.