Special assessments can hit a community’s homeowners hard in two ways; first, they are usually abrupt and unexpected, and second, the HOA demands are usually restrictive and give no consideration to the financial distress they can cause the homeowners. Offering alternate financing options for special assessments can go a lot further than the basic “pay it all at once” methodology, and can also decrease the chances of having to resort to collection, fines and liens. Here are some creative financing tips for funding your special assessments.
Make the Special Assessment Terms Flexible
Think about a special assessment where the money is paid gradually, and by a determined date. You can be flexible by asking for an approved assessment of $1500 and have only $350 due at the beginning. This way the board won’t need to pass a special assessment if additional funds are needed – especially handy for unexpected expenses on a specific project.
Give Discounts for Pre-Payment
Another option to make owners feel at ease with a special assessment would be to offer them a discount for paying everything up front. You can even set an alternative payment plan where the owners pay $200 due today, $205 due within 2 months and $215 if you pay within 3 months. However, you may want to consult with an attorney to make sure you’re not violating any laws or restrictions.
Not everyone is going to have sufficient funding in place to pay their assessments in full, so some associations have come up with other creative solutions. Try dividing the special assessment into a monthly, 2-year, 4-year, or half now, the remainder later type of payment plan. Another option is to split the payments up and have them due on a specific date. Before offering a long-term payment plans, you should check with your governing documents and guidelines to make sure this is allowed. Some guidelines are strict in keeping the assessments collected annually.
Allow Other Sources for Owners to Obtain Loans
Another alternative would be to set the foundation to help the owners obtain a loan. Some associations may have special assessments that could exceed $30,000 per unit. This is a large amount of money for an owner to come up with. A board could approach a particular bank or lender to lay the foundation (documentation, etc.) for loans; of course the individual owners would have to pay interest based upon their own credit pictures, but the lenders may look more favorably on the project as a whole.
With a slow economy, you may find a vendor that is agreeable to letting the association pay for services over a specific time period. Many vendors are in need of work because of the economic down turn, and they are willing to offer to work with the association on a payment plan. However, if an owner goes into foreclosure, the association is responsible for the full obligation.
The Association can Take Out Its Own Loan
An association could also get its own loan and provide the owners immediate funding to complete the project. This would allow the individual homeowners to pay the funds back over five or 10 years. This is a great benefit because they are enjoying the finished project, and they don’t have to break the bank to come up with the money all at once, and the association can proceed without waiting for the owners to provide their own financing.