Duty of the Board to Act:  It’s likely that the governing legal documents for your community require that the association maintain, repair and replace common areas or common elements. When maintenance, repair or replacement is needed now, the Board has the duty to take steps to obtain the needed funding for the project. There are several options, but the most common include:

• Using funds from other budget categories;

• Raising assessments mid-year;

• Loans; or

• Pursuing a vote for a special assessment

Each of these funding tools has advantages, disadvantages and possible limitations. One or more may not be a practical or available option for your community, but understanding the

options will help the board plan the best strategy to address the financial need.

Option 1: Using Funds from Other Budget Categories:  When faced with a budget crunch, the first option to explore is to look for other possible funds within your community’s budget. In most communities, a yearly budget is adopted which serves as the basis for the annual assessment, and that budget usually identifies line items for broad categories of expenses. For most communities, the Declaration of Covenants or Condominium does not require that the board spend the funds on the particular line item.  Most documents state (or can be interpreted to mean) that the budget is an “estimate” of expenses rather than a specific limitation as to how funds are to be used by the board.

This means that the board can have the flexibility to use a surplus in one category to pay for a deficit in another. The board may determine that it makes sense to temporarily eliminate one or more categories of expenses and use the funds to pay for a more critical need. It may not

make sense to pay for new flowers when the association is short on funds to repair leaking roofs.

Option 2: Annual Assessment Increases:  If you cannot rework your current budget to fund your current needs, then the logical next step is to increase that budget and increase your annual assessments. Some communities’ documents can be interpreted to allow for a mid-year increase in the annual (or monthly) assessment. In other cases, the documents may limit the ability to do this to year-end only.

Option 3: Loans:  A third method of obtaining needed funds is to seek a loan. Loans have many advantages, including:

• Providing immediate funds to complete large capital projects;

• Allowing the community a longer time to pay for immediate work, often five to seven years; and

• Allowing the board to explore smaller budget increases to pay debt service on the loan, rather than larger special assessments.

Step 4: Special Assessments:  Though not popular, sometimes a special assessment may be the only remedy.  Some communities’ legal documents require a majority or two-thirds vote of the total community to pass a special assessment. What is the best strategy to pass a large special assessment? The strategy is the same whether you are pursuing a community vote for a loan, a special assessment, or a budget increase. The key is communication.  You must be frank and upfront with the members about the association’s financial situation. Here are steps that have

resulted in successfully passed special assessments for other communities:

• Evaluate and identify the association’s specific needs. Use professionals to determine those needs.  Engineers, community association managers and consultants can help identify maintenance and repair needs, costs of necessary work and a reserve study to

illustrate the financial facts about the association’s financial position and needs.

• Educate your members. This step is vital -- since a special assessment is often considered a drastic remedy, the need for it must be obvious and clear-cut. The board should send and provide the community with full, accurate and frank information about

the situation, the options being considered, and the plan chosen to address the situation. If there is a supporting engineer’s report, send it. If there is a listing of the work to be performed, provide a copy.  When members are educated with the facts, they are more likely to support a special assessment. Understand that the board and your manager will likely have more information than the members, so be patient with their questions, and make the board and its experts (engineers, manager etc.) available (at a community meeting) to address member questions and concerns.

• Ensure that the board meets the requirements of law and the association’s legal documents. This means following all procedural requirements under the association legal documents and obtaining any required member vote. This will help avoid challenges to the special assessment and make collection of the funds easier if the

assessment passes.

• Provide flexible payment options and/or a discount for early payment. Consider payment options such as dividing the special assessments into two or more payments

and offering a discount for paying in full upfront. Review your documents to see if these are available options.

• Keep your members updated on your progress.  They need to know what the association is doing with their money – this will also be an implicit reminder to make that next special assessment payment. As the work proceeds, email them details and photos. 

The lesson to be learned from many associations --- is that to have faith in your fellow members.  If properly informed, whether it is using funds from other budget categories, obtaining a loan, or passing a special assessment, most members will understand and support a responsible plan for addressing legitimate community needs.

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