PROPERTY MANAGEMENT BLOG

Tips & Tricks for Managing the Association’s $$$

System - Friday, November 11, 2016

Encourage owners to pay

How can you encourage your unit owners to pay their fees, and pay on time? One of the best ways is probably already in your documents: charging late fees and interest. Most governing documents allow associations to charge late fees (statute allows up to $25 or 5%, whichever is higher.) Actively enforcing this option is the best incentive to owners to pay promptly. A word of advice: Never get in the habit of waiving late fees. You could be accused of selective enforcement, as well as it setting a poor precedent.

Another incentive to owners: suspend their use or voting rights. Florida statute, as well as many association’s governing documents, allow boards to suspend use rights of common elements, such as pools or clubhouses, if the owner is delinquent more than 90 days in “any monetary obligation.” Of course, this option only works if the association has the ability to restrictively block access, such as having an electronic key system on the pool gate. The board can also suspend their voting rights for the upcoming election.

Ensure you are collecting on collection costs

Are you collecting collection costs from the unit owner, or are you treating them as common expenses, e.g. legal fees? Many associations are just expensing these costs, but they are actually the homeowner’s responsibility, and should be billed to their ledger to ensure future collection. You may not see the funds immediately, but you will eventually! Foreclosure defenses may also be a homeowner’s expense. Consult with your attorney on these fees.

Have you had any balances discharged through bankruptcy? Did you write off the balance? Hopefully not! While the unit owner may have been excused from paying, the debt still belongs to the unit, and is collectible upon sale or transfer of the unit. The lien should be maintained until such time, to ensure collection. Check with your accountant and attorney for best practices for recording and recovering these fees.Oversite is important

Basic oversite can ensure that errors, or even fraud, are detected early and addressed. Some basic financial procedures that should be followed regularly include the following.

  • Review and reconcile bank statements timely – as soon as possible after receipt. There should be no outstanding deposits older than a day or two. Look at checks paid – payees and amounts should match your check register. Do you recognize all the vendors?
  • Keep separate accounts for operating funds and reserve funds. Although Florida statutes do allow associations to comingle funds for investment purposes, it is not a best practice.
  • Make sure your bank signature cards are current. Update them whenever there is a change to the board.
  • Require two signatures on all checks. Although your bank may not require or monitor it, this is a strong internal control.
  • Keep in mind the insurance limit on accounts - $250,000 is the FDIC insurance limit. If you go over this limit, your funds will not be protected.