Low HOA/Condo fees are great — at least until something goes wrong. It is the duty of an association to bring in enough funds in assessment to cover the members’ collective costs. If your HOA is charging assessments that are too low, it is setting itself up for huge financial headaches in the future. Here, our Chicago HOA lawyers highlight the high risks of low assessments and explain what you can do to better protect the financial assets of your association.
Three Hidden Risks of Low HOA Assessments
Financial responsibility and sound business practices require bringing in enough money in assessments to cover expenses and save for a rainy day. It’s best not to operate on a razor thin budget where bills are at constant risk of not being paid. Low assessments can put an association in a financially precarious position. Here are three of the hidden risks facing HOAs/Condo associations that fail to collect enough in assessments:
- When Assessments are Too Low, Services Could Be Cut: On a fundamental level, assessments are the lifeblood of a community association. They cover the basic shared costs that keep the community running. If assessments do not keep up with those costs, then the quality and availability of services will inevitably suffer.
- Reserves Get Depleted, Little Protection: Reserve funds are an essential part of any proper HOA budget. You never know when unexpected costs will arise, or emergency repairs will be needed. When assessments are too low, reserves will not be built and can quickly get depleted. This leaves little financial protection for the association.
- A Special Assessment May Be Required: While HOA members may not love paying their regular assessments, they often despise paying special assessments. According to Redfin, a special assessment is essentially a one-time charge to unit owners to cover costs not in the budget. By collecting enough in regular assessments, HOAs can dramatically reduce the risk of special assessments.
Promoting Financial Stability and Sustainability: Four Tips for HOAs
Being a responsible steward of member finances is one of the core duties of an association’s board of directors. Here are four tips HOAs and Condo associations can use to better safeguard their assets:
- Create and maintain a long-term budget. Many associations run into problems because they lack a detailed and accurate budget. With a well-constructed budget, you can determine how high assessments should be.
- Ensure assessments are enough to cover costs. Trying to skimp on regular assessments will probably cost you in the long run. Make sure enough funds are coming in.
- Do not let unpaid assessments linger. The greater the delinquency, the more difficult it is to recover the full amount owed. An experienced Illinois unpaid assessments lawyer can help.
- Be sure to conduct regular reviews/audits of the finances. Get your financial statement to an independent accountant on a regular basis.
Call Our Chicago, IL HOA & Condo Law Attorneys Today Immediate Assistance
At Keough & Moody, P.C., we are proud to offer reliable, cost-effective legal representation to community associations. If you have questions about assessments, our lawyers can help. To arrange a comprehensive, confidential initial consultation, please contact us today. With law office locations in Naperville, Chicago and Tinley Park, we represent homeowners’ associations and community associations in Cook County, Will County, Kendall County, DuPage County and Kane County.