We are in difficult financial 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 current account is drying up. Foreclosures, layoffs, bankrupt developers, and homeowners keeping cash by not paying dues; no matter which, the end result is fewer dues paid and much less cash in the association’s coffers.
Collection actions are of little use when the owner is out of work and can barely feed his family. Homeowner assessments are way down on the priority list and what are the association’s options? Record a link and exclude it? Then what? The lender has a principal lien and it is highly doubtful that there is any equity in the property anyway. Short Small Claims? Sure, and you’ll get a judgment for unpaid assessments quickly, but after that you have to run. we what? The fact is, many homeowners see no value in continuing to pay a mortgage, let alone assessments, on a condo unit that has absolutely no equity. And wages that do not exist cannot be seized.
And now that? Now is the time to start prioritizing spending. Who and what does a community association pay? What happens above? Yes, that may very well be the topic of an upcoming board meeting in many associations, so we might as well address reality now. What is the most important obligation of the community of owners? The health and safety of the owners, without a doubt. What threatens health and safety if it is not paid? Garbage collection? Yes. The water bill? Of course. The electricity bill for the common areas? Yes, especially when there are elevators, path and corridor lighting. After that, on top of the civil liability and fire insurance premium we would put the security services and the payment of the premium. Then come the management and accounting services so that there is someone to pay the bills that must be paid. Contributions to reserves must continue with the remaining cash.
Items at the bottom of our list would be the gas bill for the spa or pool heater; some or all gardening services; things such as window washing and last but not least, the cable bill for the clubhouse tv! Yes, most of this is obvious, but no board of directors has ever had to face 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 the health and safety of homeowners just to keep the grass cut!
So consider what you will do as a board member when the money runs out. Think about the personal safety of the owners first, and you will usually make the right decisions.
