When these decisions have to be made, boards must consider the best way to include residents in their thought process. And when the board of trustees comes to the conclusion that fees must be raised, hopefully they’ll announce it in a manner that will create the least amount of angst and worry for the dozens, if not hundreds, of families that will be affected.

One thing is clear: matters of money and finance are not undertaken lightly these days. “People need to remember that when they buy a condo, they’re living with people close to them and with whom they will be sharing experiences,” says James J. Caruolo, a Warwick, Rhode Island-based attorney. “It has to be the needs of the many over the needs of the few. Board members are not going to please everyone. Elected officials, after researching an issue, discussing it and talking to experts, have to remember that it is incumbent uponthem to stick to their decisions no matter what some may say.”

For many community associations today, those decisions are being made for the most part because of home foreclosures and the tough economic pressure those foreclosures are putting on shared communities. Not only are associations faced with homeowners who may not be able to pay their mortgages, let alone their monthly dues and assessments, they also are faced with banks that might not be paying those dues.

Big Losses

Even if a resident has left the premises, the lender may not have to pay monthly dues and assessments until it forecloses. After the foreclosure, in some New England states, the lender is required by law to pay six months of what is owed, meaning that many associations can still lose a substantial amount, depending on how long the property is in flux. “With property values decreasing, we’ve seen banks suspending or canceling foreclosures so they won’t have to pay the fees,” Caruolo says. “They’re not required to foreclose, so this can go on for a while. But it’s not the bank’s obligation to make sure the association gets its dues.”

Vacant properties also can lose money for the association if they start to decay. A resident may have moved out and the electric bill has now gone unpaid. If the property is in a cold climate and this happens in the wintermonths, pipes could burst without the electricity generating the heat. That can leave a wet mess that can spiral into a mold issue, which can then become a health issue.

For associations, this loss of income often means having to make difficult choices in managing the resources that are available and at hand. “There are areas where boards are looking for reductions in maintenance costs such as pool maintenance or street sweeping or roving patrols for parking monitoring,” says Nena Rutherford, CCAM, who serves as director of management services for Desert Resort Management, based in southern California, a state among the hardest hit in terms of foreclosures. “In many cases, they have to raise fees to cover these costs.”

In many cases, associations will try to minimize the loss of fees by working to keep community residents in their homes. “The association has to be focused on keeping ownership up,” Caruolo says. “Coming up with new rules and trying to crack down (to try and get fees from people) could have the adverse effect of decreasing ownership. People can just walk away. The association has to be thinking of that.”

“There are two schools of thought," says Rutherford. "The first one is, ‘get them out.’ The second is, ‘pay what you can.’ ” Her firm encourages its associations to adopt minimum payment plan options. “And if the unit owner can’t meet those minimums, then we put together a plan for them.” Then the association keeps a tally of what payments have been made and hopefully when things improve, the resident can get back on the regular dues-paying schedule.

Caruolo believes that associations need to get creative with retaining residents. For example, condos that have banned or limited rentals can ease rules and allow owners to rent their units, helping keep ownership levels up. “You can monitor the renters and make sure they’re rule-abiding tenants,” he says, but there needs to be flexibility.

Delayed Word

In other instances, cash-strapped associations also are being faced with the postponement of bigger needs for their communities. “Associations are delaying reserve work, putting off needed roof replacement or road repairs,” Rutherford says. Sometimes, in addition to or in place of a fee increase, the association board also might be forced to issue an assessment to cover repair work that cannot be put off any longer. Often, makingthat sacrifice and asking people to pay now is in the best interest of the community, saving money down the road.

“Associations have to look at which projects are going to cost more if you don’t do them now,” says Tim Wentzell, P.E., owner of Connecticut Property Engineering, Inc. in South Windsor. For example, if an association has pavement issues that can be fixed with a simple overlay of new materials, it will be cheaper to tackle the issue now rather than waiting for the pavement to degrade to the point where it needs to be ground up and redone completely. “It can be a two-to-one price difference,” Wentzell says.

So what happens when all other options have been exhausted and dues increases or assessments must be made? Hopefully, the association has been keeping an open, honest and ongoing dialogue going with its residents. “The most important thing is keeping the body of the association fully informed,” Caruolo says. “You don’t want to wait until the situation is so dire, you need to increase dues and add a $1,500 assessment. It’s incumbent upon the board to keep all of its owners apprisedon a monthly basis. In Rhode Island, associations are required to provide a financial summary annually. This lets people know where money’s been spent and where there’s red [ink].”

Start Talking Early

But when boards see financial storm clouds gathering, it’s vital to start talking and let residents know what’s brewing on the horizon. Do not, for example, levy an increase in 30 days or less. “It should be a minimum of 60 to 90 days out that you start talking about this so that people have the timeto prepare psychologically and economically,” Caruolo says. “If it comes out of left field, it raises questions in residents’ minds of who dropped the ball and how did this happen? Start reacting in a proactive fashion.”

And be clear about what’s going on. “It prepares people,” Caruolo says. “Tell them, ‘There’s a certain percentage of units that are vacant. It’s going to createa shortfall. We have to have a dues increase as soon as possible and for as little as possible.’” In fact, issuing that increase early on in the problem can indeed mean a smaller dent in the pocketbooks for residents. “Let them know that the increase is to avoid a reduction in services like landscaping, upkeep, street sweeping, pool maintenance,” Caruolo says.

Rutherford agrees. “Communication is key. Associations have to take it upon themselves to have lengthy discussions. Give their residents the balance sheets, show themhow much there is in delinquent assessments.”

And boards should not be afraid to issue this information over and over again for the very simple reason that people do not always pay attention until it’s late in the game. Rutherford recalls a situation where they had to cut down on street cleaning and things were quiet for 30 days until theusual cleaning day came and went. Then, Rutherford says, “It was like a mob descending.”

People also need to hear the message early and often because when it comes to issues of real estate and foreclosure, there is an element of apathy, Rutherford says. “People who have been responsible with their finances are not feeling very receptive at all. They feel like they’re being punished.” But the more they understand the depth of the situation, the more likely they are to get on boardwith what needs to be done.

It also helps to explain to residents what they are paying for, even if it seems rudimentary. “I’ve done this 18 years and I’m still learning that it’s important to tell people what their assessments cover. They know they have this responsibility to pay it, but they don’t know what it covers. Tell it to them like they’re hearing it for the first time. You can never give them toomuch information,” says Rutherford.

Financial Experts Helpful

Having a financial expert such as the association’s accountant or financial advisor on hand to help explain the situation also can help lend credence and support to a board’s argument. “Bring that person into the meeting,” Caruolo says. “You don’t want this to be a surprise for owners. Let them know that in 30 days there will be a meeting. We invite them to participate and the CPA will be there to answer questions.”

If an association does not have an accountant or financial firm to advise them, then Caruolo would recommend they get one. “I would probably suggestto the board to hire an accounting firm that handles condo associations, so they can tell the board what are the luxuries in the budget, what are the necessities, what are the standards for fees and help them find out where costs can be cut.”

The same formula of openness applies to special assessments for capital projects and in fact, the response can be more positive for projects that ultimately will improve the community. “Boards are often more gun shy than residents,” says Wentzell. “I’ve seen an awful lot of cases where the association worries that the owners are going to be upset, and then you have people standing up and saying, ‘What took you so long? We don’t want to drive over these potholes anymore.’”

These days, as property values become more and more important, “people want their associations to look good,” Wentzell says. “They see that improvements help value. And when property value is soft, they see it even more.”

Ultimately, the best way to face difficult issues such as fees in an economy the likes of which most people have not seen before is to simply be open, honest and upfront. After all, we’re all in this together.

Liz Lent is a freelance writer and a frequent contributor to New England Condominium magazine.