If you were collecting cheques from your residents before social distancing measures were put into place, that system may not work well right now. If possible, associations should be encouraging online payments.
Collecting fees electronically
Date Published: April 24, 2020
It’s not business as usual for any condo community or HOA right now. Some homeowners have been temporarily laid off because of COVID-19. Wages have been drastically reduced for others. People are struggling to make ends meet.
Managers and boards may be asking if they can defer or reduce monthly fees to help ease the financial burden for their community.
While thoughts about what is best for owners should certainly be a consideration, board members are fiduciaries of the association and must make decisions that are in the best interests of the corporation or association.
The fees paid by owners and renters are intended to cover the association’s current expenses, establish a reasonable surplus, and fund future reserves. That means that every dollar that you budgeted for is needed now, or in the future. Collecting fewer fees today means residents will have to make up for those lost funds in some manner later on.
Why you shouldn’t defer fees
Some people are receiving very little income because they cannot work. Compassionate leniency should be exercised when possible, and it is important for boards to review collections policies from a compassionate place. However, condos and HOAs do not make profits; they aren’t designed to make money. They do have bills to cover, and unless a third-party vendor has stopped requiring payment during the COVID-19 outbreak, your association’s expenses will remain constant. If no one pays their monthly fees, where will the association get the money to pay the expenses it incurs on behalf of its residents?
Condos and HOAs may be in a position to borrow money or use their contingency fund to cover common expenses for a short term, but ultimately, the money is going to come from the residents at some point. This is precisely why residential communities cannot refund or stop collecting amenity fees.
Special payment arrangements may be made for residents who are experiencing financial difficulties on a case-by-case basis. Encourage residents to reach out to the board or property manager as soon as possible if they are concerned about making a payment on time, and be prepared to work with these individuals to find a solution that agrees with all parties involved.
Collecting fees electronically
If you were collecting cheques from your residents before social distancing measures were put into place, that system may not work well right now. Many management offices have been closed for the time being. If possible, associations should be encouraging online payments.
You will need to let residents know how to complete online payments if they’re not already doing so. You can advise them to contact management for directions on how to do this, or send step-by-step instructions via email or an announcement. Post any digital announcements on physical display boards as well. Not all residents have registered an email with the association.
You’ve got a few options when it comes to accepting online payments. You can enable residents to add the corporation or association to their list of payees through their online banking account. Residents will need their residential account number to make payments through their bank account, and will need assistance from management.
For additional convenience, residents can register for an automatic electronic fund transfer (EFT). If they select this option, a fixed amount will be taken from their bank account at the same time every month.
Some property management software will allow residents to make payments for various fees. Our Online Payments feature gives residents the option to select recurring payments or submit a one-time payment. Residents can make secure payments at any time by logging into their online portal.
If you are still accepting cheques, make sure someone is available to collect and deposit them.
New evictions are not permitted during the COVID-19 pandemic, and current eviction orders are not being enforced (but tenants are expected to pay rent while an eviction order is not being enforced). Most provinces and states have made this temporary law to ensure no one loses their home right now.
Tenants can be served an eviction notice, but eviction hearings and orders will be placed on hold except for urgent disputes, such as those involving illegal acts or serious safety concerns.
If you do offer residents short-term relief
If you are attempting to work out payment plans with individuals, residential communities should still be following the established statutory procedures for late payments, including placing a lien on delinquent properties (but suspend foreclosure activity), that existed prior to COVID-19. By not doing this, you create a risk for the association as it may not be paid the money it is owed if protective measures are not taken. After the lien is registered and its priority is protected, you can proceed with creating a payment plan.
If you are working with people who have lost their jobs indefinitely and will be looking for employment, it is recommended that you discuss options with legal counsel and decide how best to proceed.
If delinquencies are impacting cashflow, some boards do have the option of borrowing from reserves. However, unless your governing documents state something different, money borrowed from the reserves must be repaid to the reserve fund within one year of the date of the initial transfer. In Ontario, the Condominium Act does not allow boards to use their reserve fund account to cover operating expenses. Make sure to check your governing documents before taking any money from a reserve fund.
Below are some additional options to consider if you’re trying to help your residents and ensure the association’s bills are still paid on time:
- Decrease discretionary services, even if only temporarily, if they will not have a significant negative impact on the association or reduce the property’s value
- Cancel or delay non-urgent repairs or construction
- If contracts are going to be renewed in the near future, look at reducing services or obtaining bids
- If it is budget time, take a critical look at the coming year’s assessment and expenses and see if anything can be revised
- If the association does have emergency reserves, consider whether the funds should be used
- Examine the governing documents to see if they allow the association to bill back utility charges to homeowners based on usage
- Delay internal association collection actions (such as late letters or final warning letters) for non-payment of assessments
- Be flexible when it comes to accepting non-traditional payment plans with owners in arrears
- Do not pursue more aggressive aspects of collections, such as foreclosure
- Make sure residents know how to reach you if they are experiencing financial challenges
- Keep an eye on your messages and respond to requests for flexible payment plans
- Condos and HOAs are not banks, there is only so much they can do. But don’t be cruel to your residents either
COVID-19 is putting a lot of stress on all of us. When a resident reaches out to you expressing concern that they won’t be able to make a full payment, approach the situation reasonably and calmly. Do your best to protect the property, and your residents. Make informed decisions, and work with your team and your community to get through this difficult time.