Condo Living Made Easy

Special assessments are often necessary for covering unexpected or large-scale expenses, such as major repairs, improvements, or emergency costs. However, handling these assessments effectively is critical to ensuring fairness and maintaining financial stability for your association. Here are some key considerations for condominium boards when charging special assessments.

Charge by Ownership Percentage
When issuing a special assessment, it’s important to allocate costs based on ownership percentage, unless the expense is specifically for limited common elements (e.g., balconies, specific hallways, or parking spaces that are reserved for use by certain units). Charging by ownership percentage ensures that each owner contributes proportionately to the association’s costs, following the terms set out in your governing documents.

For example, if the cost of a new roof is $100,000 and a unit represents 2% of the building’s ownership, that owner should contribute $2,000. This method is transparent and consistent, helping to prevent disputes.

Keep Payment Deadlines Simple
One common mistake boards make is offering too many payment options. While it’s important to provide flexibility, having multiple payment schedules can complicate the collection process and create confusion. Instead, consider these two straightforward approaches:

• One-Time Payment: Set a clear deadline by which the entire amount is due. For instance, the full amount could be due within 60 or 90 days of issuing the assessment.
• Monthly Installments: Offer the option to pay the assessment in equal monthly installments over a set period, such as six or twelve months. This allows owners to spread the cost over time while keeping the payment process simple.

Avoid Multiple Payment Plans
Providing owners with several payment options may seem accommodating, but in practice, it can lead to administrative headaches. Collecting on different schedules, following up on missed payments, and maintaining various records can overcomplicate an already challenging process. Instead, stick to one consistent payment method for all owners.

Be Open to Individual Payment Arrangements
While standardizing payments simplifies the process, there may be instances where owners face financial difficulties. Boards should be open to negotiating individual payment arrangements with owners who communicate their needs proactively. This flexibility allows boards to accommodate hardship cases without overhauling the entire assessment structure. However, it's critical that owners reach out to the board before the payment deadline to discuss alternative arrangements.

Charging special assessments is never easy, but with clear guidelines, transparency, and consistent payment structures, your condominium board can manage the process smoothly.

On September 10, 2024, the Community Associations Institute (CAI) filed a lawsuit against the U.S. Department of Treasury challenging the application of the Corporate Transparency Act (CTA) to community associations. CAI argues that community associations, as nonprofit organizations under IRS section 528, should be exempt from the CTA's beneficial ownership filing requirements. The lawsuit claims that the Financial Crimes Enforcement Network (FinCEN) failed to follow proper rulemaking procedures, acted arbitrarily by not exempting community associations, and violated constitutional rights by imposing invasive reporting requirements.

Additionally, CAI asserts that the act exceeds federal authority by infringing on state powers and discriminates against community associations compared to other nonprofits. CAI seeks a judicial review and a preliminary injunction to halt CTA enforcement until a court ruling is made, while the compliance deadline of January 1, 2025, remains.

Learn more here.

Investing reserve funds may help you to increase your available cash, but do you know which options are best for your association?

When investing reserve funds, the board should focus on minimizing risk and ensuring that funds are available when needed. A high risk investment account that may lose money in the long-run is not a good option for any association. You should never end up with less then you've invested.

The best options for investing your reserves are:

Money Market Accounts

Money market accounts are highly liquid, meaning funds are easily accessible when needed. These accounts typically offer higher interest rates than traditional savings accounts while maintaining low risk but rates may not be as high as other investment options.

Certificates of Deposit (CDs)

CDs are a very secure investment with guaranteed returns. They offer fixed interest rates for specific periods, often at higher rates than savings accounts. However, since they often tie up funds for several months or years, they are best used when you do not need access to the funds until the CDs reach their maturity date.
U.S. Treasury Bills or Bonds

U.S. Treasury Bills and Bonds are government-backed, making them one of the safest investment options available. These offer a steady return over time, with bonds providing interest payments over the life of the bond. Like CDs, these are best for funds that don't need to be accessed for a long time.

Remember that interest earned on invested funds is taxable over $100 for most associations and will need to be reported on your annual income tax return.

Winter maintenance and preparation are essential for condominium, homeowner (HOA), and townhome associations in cold climates to ensure safety and comfort. Proactive autumn tasks, such as maintaining landscaping, clearing gutters, and preparing irrigation equipment, can minimize winter risks.

Associations should create inspection schedules for interior and exterior common areas, addressing heating systems, lighting, frozen pipes, and potential structural damage. Proper snow removal management, including hiring reputable vendors and reviewing contracts, is crucial to reduce liability and maintain community accessibility.

Legal and professional guidance can help manage responsibilities, damages, and insurance claims related to winter incidents.

Read more here.