Averting a Financial Crisis for Your Association

By Keith F. Backer, Esq. / Published July 2020

Many communities have raised concerns about the effects the coronavirus pandemic will have on the financial ability of their owners to pay their maintenance and other assessments in a timely manner. Not only may investment income have fallen off for retirees, but many owners have lost income when businesses suspended operation.

Community associations establish budgets based upon the anticipated financial needs of their communities. Most budgets allow for some bad debt, but budgets created in 2019 and early 2020 did not anticipate the effects of a surprise global pandemic. If owners do not pay their obligations to their associations on time, a financial crisis may befall associations that do not stay on top of their collections. Boards who implement policies to address the lack of payments must be mindful not to allow their desire to remain sympathetic to their neighbors compromise the ability of their associations to fulfill their own financial commitments.

Boards should consider establishing written policies about when and under what circumstances the association will consider accommodating those who cannot pay on time. An objective evaluation of each owner’s circumstances and decisions based upon objective criteria may help avoid the suggestion that the board is acting arbitrarily or selectively.

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Owners should never be relieved from paying the principal amount owed; that may be construed to be altering the share of the common expenses that owners are required to pay in contravention of the requirements of the HOA Act and would be inconsistent with a specific prohibition of that practice in the Condominium Act. There may be other legal limitations on an association’s ability to compromise its claims that warrant counsel from the association’s attorney. How long will the association allow an owner to delay payment? What evidence of financial hardship will be acceptable? These are the pol-icy issues boards should be considering now.

It may be imprudent to announce changes in collection policy to the members in an email blast or other communication to the owners at large. As much as boards may want to ease the minds of those owners who are experiencing financial difficulty, regrettably, some may take that information as permission to delay payment even when their ability to pay has not been impaired by the effects of the pandemic. If too many owners do not pay, it will be the association that will be burdened by financial problems.

At the time this article is being written, it is not possible to estimate the economic impact the pandemic will have on communities. The time to start planning is now.

Keith F. Backer, Esq.

Partner, Backer Aboud Poliakoff & Foelster

Keith F. Backer, Esq., is a partner of Backer Aboud Poliakoff & Foelster, a law firm serving community associations in Palm Beach, Broward, and Miami-Dade Counties. The Firm was founded by Mr. Backer, a Florida Bar Board Certified Specialist in Condominium and Planned Development law with more than 30 years of legal experience in Florida. The law firm was created to provide community associations with the highest quality legal services with a degree of personal attention often difficult to obtain at larger firms. For more information on Backer Aboud Poliakoff and Foelster, call (800) 251-3562, email kbacker@bapflaw.com, or visit www.bapflaw.com.