What to do when homeowners out of work stop paying their assessments?
QUESTION: Lately We have a lot of homeowners out of work who stopped paying their assessments. We know we can borrow from reserves. The board wants to know if we can we stop making reserve contributions? -Erin S.
RESPONSE: Yes, in addition to borrowing from reserves, you can boost your operational cash by temporarily reducing or stopping your reserve contributions. The pandemic has created an emergency situation for some boards. It’s a temporary situation and boards can use monies scheduled for transfers into reserves to cover operational shortfalls.
Mid-Year Budget. There is no need to adopt a new mid-year budget. Budgets are projects and sometimes, as now, associations experience unexpected shortfalls in cash receipts and/or unexpected expenses. Next year’s budget will probably need adjustments.
Defer Maintenance. Another means of preserving cash is to defer nonessential reserve expenditures. I don’t mean critical maintenance but maintenance that does not create a safety issue or lead to property damage.
Certificates of Deposit. Reserve funds are typically invested in CDs. When they mature, boards should consider not reinvesting the money. Instead, leave it in their reserve account so the money is readily available to cover operational shortfalls if they need to borrow it
Reimbursement Required? Since we are experiencing a lockdown of our clubhouse, pool, spa, health club, library, etc. and are still paying full HOA dues, are we going to get a reimbursement? -Crystal K.
RESPONSE: No. The association still has to maintain recreational facilities and put monies into reserves. Plus, boards may have to compensate for lower cash flow due to unexpected delinquencies. Reimbursements are unlikely and offsets are not allowed.
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DISCLAIMER. The Davis-Stirling.com Newsletter by ADAMS | STIRLING PLC provides commentary only, not legal advice. For legal advice, you’ll need to hire legal counsel. You can hire ADAMS | STIRLING PLC; Keep in mind they are considered corporate counsel to associations only.