All board members know that associations need to have insurance. In the case of condominium buildings, where your insurance covers the exterior structure and part of the interior, whilst the owners’ insurance covers the interior of their unit. However, a lot of condo boards do not know that they need to have insurance for replacement cost, not what the building might have been worth a few years ago. Although some states do allow associations to insure for actual cash value, others do not. Actual Cash Value versus Replacement Cost The key difference between actual cash value and replacement cost is fairly simple: Actual cash value takes into account depreciation. That is, the building is insured for what it would cost to rebuild it minus depreciation. Replacement cost means that the building is insured for the entire cost to replace the building using like materials. A few states require an even

The COVID-19 pandemic has led to widespread economic problems from high unemployment to significant business closures. With the news focused on the latest round of governmental assistance for taxpayers and businesses, it’s normal to wonder how your neighborhood association or fellow homeowners may be affected. Many homeowners are facing long-term financial instability and job vulnerability which can have rippling effects on both HOAs and Condo Associations. We’ve previously discussed on our webinars and in blog entries the reasons that community associations can’t just halt payment collections and the potential results from not collecting assessments but what other aspects should your board be thinking about? Here are some ways boards can handle the changing state of the economy while supporting community residents and making ends meet with management and operations costs. What to Expect Associations should be ready for residents to have difficulties paying dues and maintenance fees consistently during this

The end of the year is approaching fast. One of the many things homeowners’ associations and condominium associations need to decide on is whether to do a financial review vs audit. While the two may sound similar, they are two very different tools an association can use to see where their finances are at and what they can do for their community in the coming year. What is a Financial Review? For an HOA or a condominium association, a financial review is a review of the association’s financial records. This review is done by a Certified Public Accountant (CPA), who will analyze the records using basic accounting principles to determine that the financial records are correct. What is a Financial Audit? An audit is a thorough look at the association’s financial situation. In addition to reviewing the association’s financial records, a CPA will verify the information they have been given

The State of Florida is currently trying to figure out the daunting prospect of what it may mean to ask residents to evacuate for their safety during a storm after asking them to stay at home for the coronavirus. Hurricane Season officially kicked off on June 1st, and in the middle of a pandemic, the most difficult decision to ask residents to evacuate coastal cities becomes complicated by fears of contagion. Temporarily moving in with a relative might expose older family members to the coronavirus. Friends might be wary of letting in evacuees from outside their quarantine bubble. People who might otherwise book a flight out of town worry about getting infected on a plane. And the more than 1.5 million Floridians who are out of work or may still be trying to play catch-up from not having an income for a few months might be unable to afford gas

In this time of growing financial crises, associations are increasingly considering loans/lines of credit in order to have sufficient cashflow in the event of budget shortfalls caused by increasing delinquencies or in order to pay for projects that cannot be funded through the operating budget alone but cannot be postponed. In considering loan/line of credit terms as well as structuring repayment options for owners, associations must be aware of documentary limitations on borrowing and owner assessments as well as legal limitations on borrowing and owner assessments. Loan/Line of Credit Terms Associations must be aware of typical loan terms that can run afoul of common provisions in association documents if not handled properly. Such typical terms include the pledging of reserves, real property, personal property, and insurance payments. In many instances, the inclusion of such terms requires membership approval rather than board approval alone by statute. For instance, the pledging of