Budget shortfalls occur even in the best-run communities. Unexpected repairs, rising costs, and delinquent dues payments can quickly put a strain on your homeowner's association (HOA) budget. When this occurs, stress and dissatisfaction in the HOA increase.
The good news: with proactive planning and strategic action, your Board can mitigate the effects of any budget shortfall by following the tips presented in this article.
Tips for Addressing a Budget Shortfall
Here is what your HOA Board should do if you find yourself facing a budget shortfall:
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Identify the root cause of the shortfall.
The tips below will outline how to address your current budget shortfall. However, addressing the problem's outcome is not the only action your Board should take. Instead, you also need to determine the cause of the problem.
Common reasons an HOA may have a budget shortfall include the following:
- Underfunded reserves
- Emergency repairs or system failure
- Rising vendor prices or inflation
- High homeowner delinquency rates
- Underestimated annual expenses
- Long-term deferred maintenance
Once the root cause of the shortfall is identified, your Board can take steps to prevent it from happening again.
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Communicate transparently with homeowners.
It may be tempting to keep the budget shortfall from homeowners, but that is not advisable. If homeowners learn that your Board kept the problem from them, trust will be lost. Instead, transparency about the issue is essential.
Make sure your Board shares what caused the shortfall and the steps it is taking to address it. You should also indicate if temporary changes or special fees will be introduced.
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Consider a temporary assessment increase.
If budget cuts do not get your HOA back in the green, you may need a temporary assessment increase. Temporary increases can be an efficient way to cover critical HOA costs without compromising services.
However, your Board will need to review the community's governing documents to determine any limitations or approval requirements. Also, clearly communicate the need to homeowners and explain how the additional funds will be used to restore stability.
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Explore the idea of using a special assessment.
If the budget shortfall is due to a major repair or emergency, your Board may need to consider a special assessment. A special assessment is a one-time fee homeowners pay to ensure the HOA has the capital needed to address a pressing issue.
Most homeowners do not like special assessments, so your Board will need to be sure this is the right, and only, choice before levying one.
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Partner with a professional community association management company.
Budget challenges are easier to solve with expert support from a professional community association management company, such as Partners Community Management.
Contact Partners Community Management today and let our team help your Board establish a strong financial system that protects property values and improves homeowner satisfaction!
