The coronavirus has sent the economy into a tailspin. The effects have trickled down and are affecting much of the nation. Millions of people have lost their jobs. Even those who have managed to keep their jobs may be working fewer hours or taking a pay cut. This raises a lot of concerns about finances and how people will afford their bills such as mortgage or rent, utilities, health insurance, and groceries.
HOAs are feeling the impact too. Much like homeowners, they have bills that they are expected to pay, and they must maintain appropriate living conditions for members. When members are having trouble paying assessments, that can mean that the HOA has trouble paying its own bills. Assessments are the primary source of income for associations.
However, there are ways that the HOA can work to tighten up its finances and reduce expenses where possible:
- Postpone any non-urgent construction projects, upgrades, or repairs. This can free up some money that can be put toward more important things right now. Work with contractors to reschedule service for a later date.
- Temporarily adjust services. The board may be able to reduce the frequency of lawn mowing, push back mulching or planting of flowers, or delay pool service since the pool is closed indefinitely. Stay in communication with vendors to see what kind of agreements can be worked out to save money without negatively impacting the community and its members.
- Re-negotiate contracts coming up for renewal. If a vendor contract is expiring, gather several bids and see what type of pricing you can negotiate. This may be a way to lower costs while the HOA tries to manage its budget.
- Offer payment plans if possible. If there are homeowners who are having trouble paying assessments, try to work out a payment plan. Some income is better than none, so if they can pay a small portion at a time, it can make a difference. The HOA is often limited in changes it can make to dues collection, but payment plans may be an option in an emergency.
- Tap into reserve funds if/when appropriate. Review the association’s governing documents and talk with a financial professional about whether the reserve fund may be used to cover some expenses. However, have a plan in place to replenish these funds so the association does not find itself in even more financial trouble in the future.
- Look into other resources. HOAs and COAs may be eligible for loans through the Small Business Association (SBA) Disaster Assistance Program or SBA Economic Injury Disaster Loans (EIDL). Some states and counties are offering their own economic relief programs as well. Do some research to see what the HOA may qualify for and if this is an appropriate option.
Everyone is feeling the impact of COVID-19 in one way or another, but we all must work together to make it through. If the board has questions about options for managing the financial impact of the pandemic, or other HOA operations, contact Kuester today. We are here to help and assist our communities as best we can during these challenging and uncertain times.