- Category Archives: "Financial Matters"
Don’t think owners won’t notice an extra charge from the association. Prepare for a fight and plan ahead to avoid special assessments altogether.
Many community associations turn to special assessments when confronted by unanticipated repairs, but boards need to avoid making hasty decisions to fund these surprise expenses.
Special assessments should be the last resort – not the first step –
Commercial structures such as office and apartment buildings have planned obsolescence. When they get old, they are renovated, sold or torn down and rebuilt, which usually happens every 40 to 50 years. With our tax laws, it just doesn’t make economic sense to do otherwise.
There is no similar economic motivation for obsolete community associations. Condominiums and cooperatives may not be rebuilt or renovated without the approval of most of the individual shareholders. The number of association buildings that have not been properly maintained and are at the end of their economic life is growing; and, for too many, inadequate reserves have been set aside.
Budget preparation may be the least favorite time of year for some association board members, especially those who are uncomfortable working with numbers or fear a deluge of homeowner complaints.
But preparing the budget is one of the most important board responsibilities. Yes, it can be hard work, but it’s an essential planning tool for any community. Its effectiveness depends on the preparation and research that board members put into it.
These days it seems that boards are being barraged by many issues that weren’t even considered only a few years ago. Lawsuits and claims of financial mismanagement are taking place on a daily basis. They are at best a nuisance, and at worst very costly and stressful.
Over the years, homeowners have volunteered to serve on the board because they had expertise and skills from professional careers that were applicable to the association. Examples include attorneys, accountants, and engineers. Boards were comprised of people with these skills as well as other owners who were simply concerned about protecting their most important investment – their home. This approach generally worked well in the early years of the association industry. Today, however, community associations are required to be managed more like a business. One example of this is the need to plan for future capital repairs with an adequate reserve fund.
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