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Condominium and HOA Collections During the COVID-19 Pandemic

Associations Should Not Waive AssessmentsNowackHoward HOA Collections

Homeowner and condominium associations should continue to address delinquent accounts even during the COVID-19 pandemic to avoid significant harm to association finances. The associations that successfully come out of this crisis will be those in which the members understand the payment of assessments is a “must pay” bill and where the Board is flexible in working with the members to enable payments to continue

In times of financial distress, homeowners in condominiums and homeowners’ associations facing personal hardship may ask their community association to consider stopping assessment collections.  However, assessments are the lifeblood of community associations, and the community could crumble without that financial support. Unlike many businesses that potentially have additional assets that can keep it afloat for a time, community associations only have one revenue stream: assessments.

Most governing documents, as well as state laws, do not allow for HOA and condominium assessments to be waived and doing so could also inadvertently harm the association in the process. For this reason, Boards should not waive assessments even during times of crisis.

Budgetary Considerations

Like many businesses, community associations have an annual budget which is calculated based on their projected expenses for the year. Waiving or not collecting assessments could have a devastating impact on the associations’ obligation to maintain and repair the common areas and provide normal services. 

Be Flexible

Refusing to waive assessments does not mean community associations cannot work with homeowners who are facing financial hardships. While the Board of Directors should not waive assessments, Boards should consider waiving late fees and interest for late payments resulting from COVID-19 financial distress to allow for some relief for owners. Boards may also give owners extra time to pay assessments without penalty, or offer flexible payment plans to help give owners time to get back on track after financial struggles.

Community associations are wise to communicate early and often with their owners about the payment of assessments and HOA collections. Boards should also encourage owners to reach out to the Board if they are facing a personal financial situation in order to find a solution that fits their needs. By keeping the lines of communication open as the COVID-19 pandemic evolves, Boards can work with owners without waiving assessments.

Commonly Asked Collections Q&A

Below are commonly asked collections questions and our general recommendations.  This is not legal advice for any association collection accounts.

Q: Are homeowners legally responsible to pay assessments during the crisis?

A: Yes. The Georgia Condominium Act, the Georgia Property Owners’ Association Act, and governing documents do not allow a member to be exempt from the responsibility to pay.

Q: Are homeowners entitled to a refund or to deduct any amount if the amenities are closed? 

A: No. A homeowner’s obligation to pay assessments is absolute; payment of assessments is considered an obligation of every member that is not contingent upon the association providing services.

Q: Should the Board agree to waive assessments? Late fees? Interest?

A: Boards do not have the authority to waive assessments. In fact, the Georgia Condominium Act and Property Owners’ Association Act obligate Boards to impose assessments in strict accordance with their association’s declaration. Boards have the authority and discretion to make good-faith business decisions, which include waiving late fees and interest, when appropriate. Boards should review requests for a waiver of late fees and interest on a case-by-case basis while keeping in mind the far-reaching consequences of the current crisis. 

Q: How do you recommend Boards handle delinquencies that started with this crisis?

A: Foremost, Boards should encourage homeowners to contact the Board, while still following the CDC social distancing guidelines, to discuss their individual situations, not just stop paying. 

Q: What are some examples of flexibility a Board can allow for persons who contact the Board?

A: Offer payment plans, waive interest and late fees, delay collection actions. Payment of some amount is better than receiving nothing. Any agreement with an individual member must be in writing.

Q: What about members who become delinquent and do not contact the Board? Any flexibility?

A: Yes. We recommend associations give additional time for payment before collection action is commenced. For example, if the usual process is to send 30- or 60-day collection letters to owners, change the timeline to 60- or 90-days before the initial collection letter is sent.

Q: Once amenities are reopened, should Boards deny use for delinquent owners?

A: That answer depends on the period when assessments became delinquent. We do not recommend that action for members who first became delinquent during the crisis. Boards should exercise enforcement for members who were already in legal action and those who already had a significant balance.  

Q: What do you recommend for dealing with owners who had pre-existing delinquencies?

A: The crisis is not a free pass for those with pre-existing amounts due. For most accounts with pre-existing delinquencies, we recommend the Board proceed with its normal collection procedures to the extent allowed by the crisis and court-imposed restrictions. Demand letters should be sent to delinquent owners. Depending on the financial condition of the association, the Board should consider accepting a reduced amount to settle delinquent accounts to get the funds into the coffers. That is one of the business decisions a Board is authorized to make.

Q: What should the Board be doing now?

A: Communicate with your members about the need to continue to pay as normal and that any modifications to assessment due dates and obligations will be addressed as the Board looks at the association’s revenue. And, encourage your members to communicate their situations with the Board. Since policies are enacted as responses to or in an anticipation of responding to an issue, Boards should be determining what policies, like issues of flexibility and extending due dates, are likely to be needed once current financial information becomes available. Additionally, Boards should develop policies for implementing collection action for crisis-induced delinquencies. 

Q: Are there other actions a Board should consider to afford members some economic relief?

A: Boards may consider applying for the U.S. Small Business Administration Economic Injury Disaster Loan or Advance Loan (known as EIDL), which potentially offers economic relief to community associations that need it due to temporary loss of revenue. Applications for EIDL must be made directly with the Small Business Administration (SBA) and can be made online at https://covid19relief.sba.gov/#/. Questions concerning the application process, eligibility, and eligible covered expenses should be directed to the SBA at 1-800-659-2955 or the SBA’s Southeast Regional Office at 404-331-4999. 

Boards may also look to reduce association expenses including the following:

  • Stop automatic transfers to the reserve account, if allowed by the association’s governing documents;
  • Decrease discretionary services or the frequency of those services;
  • Cancel or postpone non-essential repairs and improvements to common property;
  • Look at renegotiating association contracts for both price and services provided;
  • Prepare upcoming budgets based on the evolving financial condition of the association, including a line item for expected increased bad debt; and
  • Ask those members who can pay in advance or pay more than due, to do so for a credit on their account as a way of temporarily subsidizing those who cannot pay in full.

Unsure about HOA Collections in Your Community? Ask Us!

NowackHoward is home to some of the best HOA attorneys in Georgia. Our lawyers are fielding questions from HOA Board members everyday related to the COVID-19 pandemic. We are here to help you find the best ways to maintain your community’s health and safety, as well as the functionality of the association to remain strong in the face of new challenges.

Call us at (770) 863-8900 or visit us online at www.nowackhoward.com to schedule a consultation with one of our HOA attorneys to learn how you can better serve your community during tough times.