As a result of the hardships currently being experienced by association members due to the coronavirus, associations that govern the operation of condominiums and common interest communities are faced with the likelihood of escalating defaults in the payment of regular and special assessments, and fines that have been imposed for various violations of the association’s governing documents.
Associations learned from the last recession that when they did not collect dues and assessments from their members during periods of hardship, they too suffered financially because of the loss of needed revenue. The impact of the economic shutdown caused by the coronavirus is certain to once again expose associations to substantial financial hardship resulting from the nonpayment of dues and assessments by members. To minimize the impact of the anticipated loss of revenue by associations, they should be proactively planning on how to adjust to the current circumstances. Aside from efforts to reduce expenditures as much as possible without harming the association, associations should anticipate a need to negotiate payment plans with owners who are unable to stay current with their obligations owed to the association.
Forgiveness or Deferment of the Payment of Dues and Assessments.
Association directors have fiduciary obligations to maintain common areas and to enforce their governing documents. As such, a board may not waive the members’ obligations to pay dues and assessments that come due under their governing documents and applicable state statutes. Notwithstanding same, boards should not be unsympathetic to the legitimate financial hardships being experienced by association members as a result of the coronavirus. To satisfy their responsibilities and at the same time work with financially strapped owners, the directors should have plans in place that are designed to work with the members to get them through the difficult period, but still meet their responsibilities to the association. This would be accomplished though the structuring of payment plans that call for considerations such as a temporary deferment of payments, and/or a temporary reduction in the amount of a required payment, and the waiving of interest and/or late fees. The policies that are adopted should apply equally to all owners who request a payment plan.
Imposition of Fines for Violations of Governing Documents.
With the exception of violations that are actually caused by the coronavirus, association boards should continue to notify owners of violations of the association’s governing documents. To the extent that an owner requests an exception to a particular restriction or an extension of time to correct a violation due to circumstances caused by the coronavirus, the board should accommodate reasonable requests. Additionally, to comply with necessary social distancing requirements, the board should not be scheduling any in person hearings re violations. To the extent that hearings cannot be effectively conducted through telephonic or video conferencing, all hearings re violations should be postponed until an appropriate date. Furthermore, unless the association’s governing documents prohibit it, the board should consider suspending the imposition of fines during the period of the financial hardship.
Resources to Facilitate the Adoption of Payment Plans
To prepare for dealing with owner hardships that are caused by the coronavirus that will necessitate the use of payment plans, associations should review their state statutes and governing documents for provisions relating to payment plans and ensure that they have appropriate policies and procedures in place for timely responding to the needs of their owner members who become financial hardship victims of the coronavirus. To that end, the following resources are available on the HOA Member Services website to facilitate those policies and procedures:
- Forms Included in Guide:
- Guidelines to Establish Alternative Payment Schedule
- Directors’ Resolution re Adoption of Guidelines to Establish Alternative Payment Schedule
- Itemization of Delinquent Amounts Owed by Owner
- Request to Meet with Board in Executive Session to Discuss an Alternative Payment Plan
- Notice of Meeting with Board of Directors re Request for Alternative Payment Plan
- Worksheet to Establish Alternative Payment Schedule
- Directors’ Resolution to Authorize Agreement for Alternative Payment Plan
- Notice of Board Decision on Request for Alternative Payment Plan
- Payment Plan Agreement