In a previous post, we talked about the importance of adequately funding your reserves as an HOA. While it would be ideal for every HOA to have a healthy reserve fund that could cover almost any unexpected cost, that’s not always the case. Not all associations have built up a reserve over time. Some may have had recent unforeseen emergencies that depleted their reserves, while others may still be trying to recover their reserves after several years.

While we hope it doesn’t happen to you, sometimes the HOA has no choice but to levy a special assessment against the owners when there’s simply not enough money to cover unexpected or emergency costs. It’s safe to say that no owner will be thrilled about having to hand over extra money to the HOA. However, the way you approach announcing the assessment to the community can make a big difference in how willing owners are to cooperate.

Here are some tips:

  1. Be Up Front with Owners – There’s no sense in beating around the bush. When you send a letter to owners, get straight to the point of why this special assessment is needed and why the association doesn’t already have the funds to cover it. State that the assessment has been approved by the board and cite the authority that the board has to adopt and levy the special assessment.
  2. Show that You Considered All Options – Make sure you communicate to owners that you didn’t automatically jump to using a special assessment as the solution to the problem. Explain that the board considered other alternatives such as taking out a loan from the bank, postponing repairs, or selling common assets. In the end, the special assessment made the most sense for the good of the community.
  3. Outline Their Options – In certain situations, owners may have different options in paying the special assessment. Many associations offer single payment or multi-payment options. Some owners may have insurance coverage for special assessments, and your association may have an arrangement with the bank to offer financing to owners. If these options exist in your special circumstance, be sure to make owners aware of them.
  4. Be Sympathetic – As board members, you are owners, too. Express sympathy (or regret in some cases) about having to turn to owners for these funds. Let them know that you recognize it’s a temporary inconvenience for them, but also reiterate how important it is for the best interest of the entire community.
  5. Details, Details, Details – Be sure to clearly state the total assessment amount along with the exact cost of each owner’s share of the assessment. Provide as many details as possible about payment options and payment deadlines so there’s no question about the action owners need to take.
  6. Make Payments Easier – Try to make the inconvenience of funding a special assessment as easy as possible for owners. Dividing a special assessment into 12 equal payments for owners with monthly due dates can take the sting out of having to pay one lump sum. This can also help the board in the case of foreclosure or bankruptcy in that it may be possible to recover unpaid dues.

Announcing a special assessment isn’t something HOA boards look forward to doing, but we hope these tips can help if the need ever arises. To avoid special assessments altogether, start now to take steps to fund adequate reserves for your HOA. Not sure where to start? Contact Spectrum today and learn how our HOA management services can help get your finances in order.