Budget Tips for Condo Associations and HOAs

Saving money should always be the policy for most condo associations, but now it is on people's minds more than ever.

The board of directors of a condominium homeowners association or cooperative have a fiduciary duty to the owners and members of the community and should always be looking for new ways to maximize revenues and curtail expenses.

Here are a few money saving tips:

Gas and electric brokering: Many condo associations have terminated their relationship with the local natural gas and electric providers in favor of middlemen who purchase their utilities competitively from a much larger market or surplus brokers and pass the savings on to the condo association.

Cellular phone and OTARD antennas: This is limited to mid-rise and high-rise buildings but telecommunications, television and other media services are willing to pay a lucrative leasing fee in order to maintain an antenna on a number of taller condo buildings.

Laundry room leases: Many condo associations have long-term lease agreements with laundry room service providers. As these leases approach expiration, new deals can be negotiated for a larger cut of proceeds and/or cash upfront. This is one of those relationships that should be looked at annually. In fact, on occasion one provider may be willing to buy out the balance of a competitor's lease if the property is large enough (Caveat: Be careful, some of these leases have a first right of refusal, and prohibitive penalties for wrongful termination). This also applies in some instances to parking garage vendors.

Competitive bid condo association insurance: Many boards do not hesitate to seek maintenance and repair bids, yet neglect to shop their insurance. A qualified condo association insurance specialist can get quotes for three or more carriers, and by comparing coverage versus premium cost, there can often be substantial savings.

Collecting delinquent assessments: This is a major problem for many associations, some who have historically never had a problem, but there are effective ways to minimize losses and have higher recovery rates.

• Bankruptcy or foreclosure: A bankruptcy or a foreclosure is not necessarily the end of the world. The lien for unpaid assessments is not a dischargeable debt (although it will extinguish the personal obligation), and other than a delay, it should be recovered in either a Chapter 7 or a Chapter 13. If the property is foreclosed, the purchaser at the foreclosure sale is obligated to start paying assessments from the first of the month following the day of the sheriff's sale. Condominiums (only) are also entitled to recover six months of assessments from the purchaser from the mortgagee. (It is worthwhile to ask for everything owed, and also to ask even if the property is not a condominium. No harm in asking and you may get lucky!)
• Collection services: The smaller the debt, the easier it is to collect. First, frequently remind owners that if they do not pay on time, they can be evicted. That should get their attention. Second, if the delinquent owner is referred to legal counsel after not more than 60 days, at that point the owner will only owe two months assessments, two late fees and a nominal legal fee. The later it is turned over, the larger the amount to collect, the harder it is. (Note: According to state law, it is illegal to charge back a turnover fee, or manager collection services fee, unless it is a cost, it is in the management contract and the authority to call this fee is specifically stated in the declaration or bylaws. A board and/or a manager could be liable for damages if they illegally attempt to collect these fees. The only additional charges authorized by this statute are costs, late fees, interest (if provided for in the declaration) and attorneys' fees awarded by the court.

Going Green: Lastly, it is trendy now to be "green" but aside from the obvious environmental benefits, there can be some cost saving and revenue recovering programs.

• Reducing fresh water consumption is good for the environment and reduces water bills.
• Different roofing materials (a white roof or a green roof) can reduce cooling costs in the summer and heating costs in the winter.
• Negotiating private recycling agreements for larger properties where cans, bottles or even newspapers can be sold directly to a private recycler instead of paying the solid waste management company to dispose of them.

Learn about HOA Loans to improve condo association cash flow