For the first time, our condo association is going to have a financial surplus in our condo reserve at the end of the year. This is a great milestone for our condo association. We are a 4 year old condo association with 18 condo units. As we took over from the condo developer we learned some important lessons about condo association finance.
Always have a financial professional look at the condo association finances before the condo association assumes control As it turns out, the condo developer’s financial projections for condo fees were short on cash flow to get us through the year and some expenses were low-balled. Fortunately we had a condo board who was astute enough to identify this and bring it to our condo assocation's attention before the developer transition. We still had to deal with the shortfalls by raising condo fees and one assessment, but at least we knew what we were getting in to and it was a manageable deficit over time.
Establish a Condo Association Line of Credit with a bank. This is your condo association insurance policy should you meet unexpected expenses related to leftover items from the condo developer or condo association property upgrades that can’t wait. In the case of our condo association property, which is a former apartment building that was converted to condos, there were a number of outstanding obligations that were not met by the condo developer. For example, we were promised a secondary stairway that was never completed and condo reserve funds toward a new boiler which needed replacement. Further more, our condo elevator needed repairs, but to this day, continues to be a risk due to its age. These are all issues that we dealt with, partially by condo assessment. I recommend getting a condo association line of credit which will convert into a condo association loan or HOA loan should your condo association draw dawn on the credit line. Regardless if you need to assess condo owners, at least it’s accessible for emergencies. Otherwise, you can take out a one-time condo association loan or HOA loan from a bank and keep the cash in your condo reserve fund.
Charge condo unit owners substantially for late condo fee payments. Your condo association is not a bank, let alone a for profit business. Late condo fees can become a source of income for your condo association and serves as a great deterrent for condo owners to become chronic late payers, which can eventually lead to default.
Check your Condo Assocation Insurance Policy Most important to review the current condo association insurance policy in place and to understand what the condo assocation insurance policy covers in event of a loss. Another important part to understand about your condo association insurance policy is how for into the individual condo unit the condo association insurance policy covers in the event of damage. Ask any condo association insurance agent or broker to review your current policy and they should do it for free. Also, if you are a condo board member, make sure your condo association insurance policy has officers liability insurance coverage in place to cover the condo board should there be a lawsuit.
