Lately, it feels like our country has been on an economic roller coaster, traversing through work-from-home requirements and mass layoffs during the Pandemic; shifting to severe employee shortages, supply chain issues, and return-to-the-office requirements; and most recently experiencing high inflation and high interest rates, coupled with more layoffs. This whirlwind has taken a toll on us all, as well as having put the squeeze on our wallets. Whether our country is headed for a recession or not depends on who you talk to. However, we can all agree that, in one way or another, we have all been impacted by these economic up and downs.
When economic hardships become apparent, the welfare of our community associations are on the line, leaving our community association’s Boards of Directors grappling with how to manage the association’s financial affairs, from the payment of bills, assessment collection, securing loans, and the funding of common element maintenance. When individual homeowners cannot afford to pay their monthly assessments, the association has to pivot in how it conducts its business and where its energy is focused. A well-prepared association will have a structured plan in place to weather the storms of periods of financial uncertainty.
Now is a great time for an association to prepare, adopt, and implement processes for how it will manage business items, such as delayed or delinquent assessment payments, deferred maintenance issues, lending crackdowns, or any other road-blocks that may occur due to a slow economy. A well-prepared association will have, at a minimum, the following:
- A budget review plan to assess the association’s cash flow and to make adjustments, if necessary;
- A Reserve Study that provides for maintenance projections, along with an established reserve account to which members are contributing on a regular basis. This may include a plan to shift additional funds into the association’s reserve account, if necessary;
- A collection policy, with due process procedures, which can be utilized as a collection tool; and
- A policy and/or process by which the Association will pay down existing debt and/or keep debt to a minimum;
Finally, it is always important for associations, their Boards of Directors, and the associations’ members to communicate with each other. You should discuss the plans that are presently in place, be willing to have tough conversations about the topics discussed above, build trust in the Association, and keep rumors and fear to a minimum. Keeping the membership of your associations happy is always a wise investment.