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Alternative Revenue Sources for Community Associations

08/01/2018 10:29 AM | CAI Rocky Mountain Chapter (Administrator)

By Stephane Dupont, The Dupont Law Firm, LLC

Budget season is still far away for most community associations, however, it is never too early to address how an association can improve its ability to meet current and future financial needs. While regular assessment fees account for most of an association’s annual revenue, the financial health of an association can be improved if it thinks ‘outside of the box’ and considers non-traditional means of obtaining additional income to keep annual assessment fees low and ensure that maintenance and improvement projects are completed.

MAXIMIZE CURRENT INCOME

Before considering alternative methods for raising association funds, it is not a bad idea for an association to look at how it can maximize its current income stream. First, an association should ensure that collection of assessments are diligently pursued against delinquent owners.  To that extent an association should ask whether it is timely following the process in its collection policy and turning matters over, as necessary, to legal counsel or a collection agency.

Next, if an association has a clubhouse, meeting room or other area that can be utilized by its owners, an association may consider actively promoting the space for rental by its members and their guests for a reasonable charge.  A rental agreement should be drawn up so that there is no confusion surrounding the rights, responsibilities, and liabilities of the association and owners.

Finally, an association may determine if it can save resources by renegotiating existing vendor contracts. This not only involves locating high quality and reputable, lower cost vendors but also cutting back on services that an association may not be utilizing or realizing much benefit. For example, an association could consider cutting back web hosting services if it rarely updates its website and communicates primarily to owners by newsletter or written correspondence.

FINDING NEW INCOME STREAMS

One of the most common ways that a common interest community can generate additional revenue for their membership is through advertisements.  An association can start a monthly, electronic or paper newsletter or newspaper that is disseminated to all residents in the community and offer advertisement space for sale to both residents and local businesses. Especially in a larger community, many local businesses are readily enticed to reach out to a wide audience at a fraction of the cost of traditional marketing. If these options sound too time consuming, an association can consider selling ad space on community bulletin boards, common areas, or on its website. 

If a community does not mind the potential eyesore and there is available space, many telecommunication providers demonstrate interest in installing cellular towers in communities. The amount of income generated is contingent on the location of the towers. Typically, a lease agreement is executed with the provider for a specified number of years and an easement may also need to be drafted and provided.  Given the potential complexity of the agreement, it is important that it be drafted and/or reviewed by legal counsel. It is also recommended that the proposed lease be first discussed with the membership as health and property value concerns are frequently voiced when this income option is proposed.  Most of these concerns can be overcome by pointing out the financial benefit to homeowners and further pointing out the potential improved cellular service in the community.

Some common interest communities may also be fortunate enough to be able to sell or lease oil, gas, mineral, or water rights to generate additional revenue.  While it is unlikely that an association is ‘sitting on a gold mine,’ thousands of dollars can be earned annually from these valuable resources if a proper agreement is put in place.

Finally, an association should consider either hosting or sponsoring events in their community. Many associations host annual barbecues. Consider making the event more attractive for residents to attend by providing live music or activities for children such as a bounce house or face painting. The event can be promoted as a fundraising activity for the community with a reasonable admission fee.  Obtaining sponsorships for events can also lead to additional revenue generation in a community. For example, a community located on a golf course could consider hosting a golf tournament and obtaining sponsorships. If you live in a rural community with stocked fishing ponds, how about hosting a fishing tournament? The ideas are endless and limited only by the ingenuity and creativity of an association.

As there may be potential tax implications or insurance related issues with some of the suggestions above, it is a good idea for an association to conduct its due diligence before implementing any potential new income streams. 


Stephane Dupont is the managing member of The Dupont Law Firm, LLC and has been practicing community association law since 1999. 

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