Since the beginning of the spread of the Coronavirus here in the United States, I’ve been contacted by hundreds of board members seeking advice about how they should deal with homeowners who have stopped paying their monthly homeowner association assessments. Many homeowners have lost their jobs or have had their incomes substantially reduced, and do not have savings they can draw upon. Other homeowners have not lost their jobs, but they fear losing their jobs and have decided not to pay their monthly assessments in order to conserve their cash. This is a choice they are making. Still, other homeowners are refusing to pay their assessments, justifying their decision on the basis that if others are not paying, they are not going to pay because it’s unfair for them to pay the expenses of their neighbors.
Most board members also understand the following:
1. They have a duty to do what is in the best interest of the association which is either a
non- profit mutual benefit corporation, or an unincorporated association.
2. They have a duty to take every reasonable step to collect assessments on behalf of
the association.
3. If they breach their duty, there may be adverse consequences for them individually and
the association, and
4. If they don’t take the steps necessary to collect assessments, additional homeowners
may become emboldened and refuse to pay, leading to an economic disaster.
So now - lets talk about reality. Without assessment funds, the association cannot pay the following:
1. The property insurance that protects every owner’s home and the liability insurance
that protects against lawsuits. Bad things happen which is why it’s important to have
insurance: fires, earthquakes, injuries, crimes, broken pipes, roof leaks, and more.
The board needs money to provide insurance protection.
2. Other necessary operating expenses which may include, water, common area
electricity, natural gas for shared water heaters, elevator maintenance, gate repairs,
roof repairs, plumbing repairs, and more. If your HOA doesn’t have the money to make
roof repairs or to fix plumbing leaks, the association’s costs will skyrocket, as small
repairs turn into big repairs. If ignored, water intrusion will create mold which is costly
to remediate. Failure to maintain the common area can also lead to lawsuits.
3. Most board members realize that if reserves are not set aside as required by law, a
new set of problems will be created. Namely:
• Maintenance will be deferred which always leads to greater overall operating costs.
• Mortgage lenders will likely refuse to provide new buyers and those wanting to
refinance with their best, lowest priced real estate loans.
• Buyers recognizing that special assessments will be required, will offer to pay less to
those wanting to sell. This can be very significant.
For example, if a buyer is looking at a $10,000 special assessment, that $10,000
represents cash. It cannot be financed as part of a loan over 30 years. Thus, a $10,000
special assessment could likely result in a $20,000 or $30,000 price reduction.
• Also most importantly, many board members are aware that in times of economic
recession, which has certainly been brought about by the Coronavirus, there are many
people looking for creative ways to find money.
It’s particularly important at this time, to have funds available to eliminate all known
dangerous conditions including trip hazards, loose stair rails, and any other conditions
that may turn into a claim against the association.
In summation, nearly every board member knows that today it is extremely difficult for many people to pay their assessments, but it is also necessary to protect the interest of every member of their association. Consequently, the board should hire a competent, experienced, and compassionate assessment collection company to assist it at fulfilling
its responsibilities.
My background includes having practiced HOA law for more than 22 years and having supervised an HOA property management company for more than 33 years.
I currently provide consulting services to many homeowner associations and expert witness services to attorneys.
I hope this information has been of assistance to you.
Again, my name is Michael Chulak. I can be reached at 818-991-9019 or Email: MChulak@MTCLaw.com
1. Homeowner Associations and Coronavirus
2. Homeowner Association Insurance - What You need to Know
3. Free Homeowner Association Board Training Seminars Southern California
4. Homeowner Association Assessment Collections in California
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