This is the fourth and final part of a planned series of posts advising our community association clients and their management companies how to proceed and conduct business during these unprecedented times.
We've been closely monitoring all of the latest developments in the news and with our local government authorities to keep our clients advised on proper courses of action during these unprecedented times. For our final post in this series, we are looking to accumulate and answer some of the most common and pressing questions we've been receiving from many of our clients.
Should we waive assessments?
Community associations are charged generally with maintaining common areas and facilities for its members. As a director, you have a fiduciary and statutory duty to the members to balance and fund a duly-adopted budget. The only way to fund the budget is to collect assessments. Failure to do so will render your community unable to pay for vendors like security personnel or landscapers, pay for insurance, etc. Unless there’s a new law or directive issued by a governing body, it does not appear as though a board would have the legal authority to waive assessments.
In addition to being legally suspect, waiving assessments would create a myriad of other problems. For instance, most communities have that one trouble file that has been delinquent for years and stuck in some quagmire of bankruptcy and mortgage foreclosure. If you waive assessments to some owners due to income reduction as a result of COVID-19, would you then also offer that same waiver to this long-time troublemaker? There are other issues also, such as the length of such a waiver, how to deal with those that have pre-paid their assessments, and how to deal with the budget shortfalls and vendors that can no longer be paid as a result.
If you waive assessments to some owners due to income reduction as a result of COVID-19, would you then also offer that same waiver to this long-time troublemaker?
At this point, our advice would be to waive late fees and interest and, upon request in writing from a delinquent owner, accept prolonged payment plan arrangements or one whereby an owner pays a minimal amount until the State of Emergency has been lifted.
If we can’t waive assessments, can we reduce them since members can’t enjoy common area facilities right now?
For much of the same reason as stated above for why you cannot waive assessments, you also should not reduce the fees. As we will discuss below, most associations with amenities (pools, gyms, etc) have or should have closed them to prevent the spread of the novel virus. We would emphasize that this closure is temporary. There’d be no way to objectively determine what reduction would be appropriate. For those reasons, any request to reduce the assessment should be respectfully rejected.
What about files that are currently in collections? How do we handle liens and foreclosures?
There has been no order by any governing body that would restrict sending notices, demand letters, or placing liens on properties. As such, a community association would be well advised to make sure that a lien is recorded on files already in collection in order to protect its interest in the event that the owner files for bankruptcy or the property is foreclosed for failure to pay mortgage or property taxes (very likely given the fact that almost 80% of the country is under a stay-at-home order).
With regard to lien foreclosure lawsuits, the Community Association Institute on March 31, 2020 released a Statement of Moratorium on Foreclosure Actions urging communities around the world to immediately suspend all foreclosure activity and not begin new foreclosure actions until June 1. Moreover, many counties throughout Florida are not allowing foreclosures to proceed. As there’s a lot of competing interests, we would recommend that you discuss with your attorney about each matter specifically. We are continuing to monitor any developments with regard to the filing of foreclosure suits.
Should we close our common area amenities and facilities?
Yes, due to the various stay at home orders (including the one issued by Governor DeSantis on April 1, 2020 for 30 days). The secretary of the Florida Department of Business and Professional Regulation (“DBPR”) executed an order this past Friday which grants authority to board of directors to enact their emergency powers under the homeowners association or condominium statute. One of those special powers should be to close pools, gyms or any other like or similar amenities. Again as stated above, these measures are temporary, and by statute are , “limited to that time reasonably necessary to protect the health, safety, and welfare of the association and the unit owners and the unit owners’ family members, tenants, guests, agents, or invitees and shall be reasonably necessary to mitigate further damage..”
What should we do about vendors?
Obviously, your association is going to be bound by the terms of your contracts with your vendors. For those vendors with a fixed monthly cost over a certain term (one year or more), if you have a good enough relationship, you can talk about your options with them, but as the pandemic is likely affecting their small business as well, there may not be much that can be done. Continue to collect your assessments as you can and make sure your fixed costs as set forth in your budget are paid.
Continue to collect your assessments as you can and make sure your fixed costs as set forth in your budget are paid.
If you have any discretionary services or non-urgent repairs or projects, hold off on those for the time being as we don’t yet know how long this will last. If you feel that a repair is urgent and you’re afraid that there will be a shortfall as a result of this, talk to your manager and your attorney about the legal avenues to levy a special assessment.
We wish you the best of luck in navigating this crisis. If you ever need any guidance or assistance, please speak with our office or your attorney.