Blog
By Aileen McGinnis, Westward360
With the significant increases in the price of insurance the past few years and costs for vendors and capital projects rising, auditing your Association’s expenses is an imperative action every Community Manager and Board of Directors should take. Regular audits not only tighten budgets but also help protect reserves and reduce the need for special assessments. Here’s a practical approach to auditing for savings, based on strategies I’ve used successfully over the years.
1. Start with Preventive Maintenance
It may seem counterintuitive, but spending money early can save more in the long run. Preventive maintenance—like routine roof inspections or sealing cracks in pavement—can significantly reduce emergency repairs and extend the useful life of major assets. Emergencies are almost always more expensive due to rush fees, lack of multiple bids and damage escalation.
Associations that schedule regular maintenance inspections for roofs, boilers, irrigation systems and other infrastructure consistently report lower annual maintenance costs over time.
2. Seasonalized Budgeting
Many associations use a flat monthly budget that doesn’t reflect seasonal realities. For instance, water use spikes in the summer, while heating bills increase in the winter. Instead, segment your utility, landscaping and snow removal budgets by season. This helps boards identify and plan for peak usage periods and makes monthly cash flow easier to manage.
3. Go Out to Bid, Renegotiate Contracts and Review Terms
It is a best business practice to solicit competitive bids for all contracts, even if the Association is satisfied with current service providers. Although the Board of Directors may be happy with the company they are working with, the potential for significant cost savings through vendor evaluation warrants a formal bidding process, which could realize substantial annual reductions in expenditures. Vendors often raise prices incrementally each year, banking on boards not to push back. Don’t let inertia cost you. I recommend reviewing all contracts annually and renegotiating long-term agreements when possible. I’ve found that oftentimes, vendors are willing to negotiate on pricing when there is potential for them losing the work entirely.
Always ask if routine maintenance is included. Elevator maintenance, for example, can be very costly. An elevator maintenance contract that includes free service calls during business hours will cost you far less than one that doesn’t.
If you have a good payment history and consistent business with a vendor, use that as leverage to ask for a discount or improved terms. Consider bundling services or asking for multi-year pricing locks.
4. Embrace Technology for Efficiency
Simple upgrades like rain sensors on irrigation systems can prevent thousands of gallons of wasted water and remote irrigation controllers can eliminate unnecessary trips to the community. Similarly, switching to LED lighting in common areas—especially parking lots and hallways—can cut electricity bills significantly.
Take it a step further by applying for rebates. Many utility companies offer incentives for switching to energy-efficient systems. Landscaping grants may also be available through local water agencies to support drought-tolerant landscaping, which reduces long-term irrigation costs.
5. Insurance: Look Beyond the Premium
Insurance is one of the largest fixed costs for many HOAs. Yet, I often see associations overlooking possible incentives that could lower their premiums. Installing security cameras, upgrading roofs with impact and fire-resistant materials, or adding fire-suppression systems may qualify you for discounts.
Work with a broker who specializes in HOA insurance. They’ll often know which underwriters offer the best pricing for specific community types and may even provide a free audit of your current policy.
6. Track Water Usage and Watch for Leaks
Unexplained spikes in water bills are usually a sign of hidden leaks or inefficient systems. Request monthly water usage reports from your utility provider and compare them to previous years. If you see a jump, investigate. You may reveal an underground leak or failed wax ring on a toilet causing water loss.
7. Create a Finance Committee
It’s hard for board members alone to keep an eye on everything. A dedicated finance committee of detail-oriented homeowners can help review invoices, analyze trends, and propose efficiencies. Often, they’ll catch inconsistencies or waste that others miss.
8. Negotiate Legal Retainers and Explore Prepay Discounts
Legal advice is essential—but costly. Instead of paying hourly, consider negotiating a monthly retainer with your legal counsel for routine questions and document reviews.
Similarly, some vendors offer discounts for upfront or annual payments. If your cash flow allows, check in with your vendors to see if there is any incentive offered for an upfront payment.
9. Optimize Vendor Visits
Lastly, make your vendors’ trips more efficient. For example, instead of calling a vendor every time a lightbulb goes out, schedule monthly bulb replacement visits. Consolidating service calls saves money on trip fees and minimizes interruptions.
There’s no one silver bullet for curtailing HOA expenses—but with a structured approach, you can achieve meaningful savings. The key is to be proactive, not reactive. Regular audits, smart upgrades, and better contract management are all tools that have served my Associations well over the past 15 years.
Managing an Association is a balancing act between fiscal responsibility and community service. But when you can cut costs without cutting corners, everyone wins.
Aileen McGinnis is a Senior Community Association Manager with Westward360 and has 15 years of experience in the industry ranging from portfolio management to onsite luxury highrise management. She places great importance on demonstrating integrity, respect and building strong relationships with both the communities she manages and her colleagues.
By Jack Thomas, Elk Horn Painting
On June 24, 2021, a condo tower in Surfside, Florida partially collapsed in the middle of the night. Ninety-eight people lost their lives. In the aftermath, investigators uncovered years of delayed repairs, deferred structural maintenance, and warning signs that had been seen—but not acted on. For many in the HOA world, Surfside became a wake-up call. It exposed what can happen when financial pressures, human psychology, and group dynamics combine to postpone critical upkeep.
While most communities will never face a tragedy of that scale, the forces that led to Surfside’s collapse are at play in many associations. Cracks in the stucco, roof leaks, failing drainage—these are rarely sudden. They build over time, and so do the psychological patterns that allow boards to put off addressing them. The problem isn’t carelessness. It’s often a set of invisible mental traps, social dynamics, and structural habits that push tough decisions down the road. The good news is that many experts have studied these obstacles, and we know what the solutions are.
Present Bias
Take present bias, for instance—the tendency to prioritize short-term comfort over long-term benefit. In board meetings, that might sound like: “Let’s wait until next year’s budget cycle,” or “We don’t want to raise dues right now.” The issue is, next year often looks exactly like this year, and the repair gets more expensive in the meantime. According to national facilities data, deferring maintenance can raise future costs by 15 to 30 times.
Tool: Implement an automatic minimal-planned-increase dues policy (e.g., 3% annually, or higher as needed). This reduces emotional decision-making and builds financial readiness gradually.
Optimism Bias
Then there’s optimism bias—believing, sometimes unconsciously, that nothing will go wrong. When reserve studies or inspection reports identify major upcoming repairs, it’s tempting to downplay the timeline: “That’s years away.” But buildings, like people, age regardless of how much we’d rather not deal with it.
“If I have a goal to lose weight, it does not help if I only weigh myself every six months. Rather, I will weigh myself each day and week to see if my current diet is working... The same rule applies to a Reserve Study.”
- Bryan Farley, President, Association Reserves
Tool: Require a reserve study presentation at your annual meeting with simple visuals showing risk timelines and funding gaps.
Pessimism Bias
At the other end of the spectrum, pessimism bias can also freeze action. When a big repair feels insurmountable, boards sometimes do… nothing. Not because they don’t care, but because they assume any action will spark backlash, cost too much, or fail to pass.
Tool: Break major repairs into phased mini-projects, starting with the lowest-cost/highest-impact step. This builds early momentum and reduces overwhelm.
Conflict Avoidance
Add to that the social nature of HOA boards. These aren’t strangers in a boardroom—they’re neighbors, often volunteers, trying to keep the peace. That makes conflict avoidance common: directors hesitate to propose fee hikes or special assessments, fearing the fallout. It's easier to delay and hope for a future board to handle it. But that often creates a domino effect: year after year, critical repairs are tabled until something breaks.
Tool: Have your CAM or contractor present cost multiplier comparisons: “Fix today: $8,000. Fail later: $60,000.”
Solutions
So what can boards do differently? First: make maintenance visible. Updated reserve studies and condition assessments aren’t just compliance tools—they’re psychological counterweights to optimism bias. When you see the roof lifespan chart or read that the boilers have two years left, it grounds the conversation in reality.
Tool: Assign a rotating “devil’s advocate” role at board meetings to challenge status-quo assumptions about deferrals. It institutionalizes thoughtful dissent.
Second: normalize action. Annual dues increases tied to inflation and aging components are much easier for owners to accept than a sudden 200% spike. Transparent communication—especially when framed around preserving home values and avoiding future hardship—builds trust. Boards that share reserve funding levels, show cost trajectories, and hold town halls tend to get more buy-in.
Tool: Use a deferred decisions memo for board transitions. Each outgoing board leaves a one-page summary for the next, creating continuity and accountability.
Third: build a culture of stewardship. This starts with leadership. When even one board member reframes the question—“How do we protect this community for the next 20 years?”—it opens the door to longer-term thinking. And when board members feel supported by owners, managers, and experts alike, they’re far more likely to face the hard decisions head-on.
About the Author & Acknowledgements
Jack Thomas leads business development for Elk Horn Painting, where he helps HOA boards and property managers across Colorado protect and elevate their communities through thoughtful, high-quality exterior painting projects.
This article was developed with writing and research support from ChatGPT (OpenAI) using a curated body of expert sources.
By Bryan Farley, Association Reserves, LLC.
News has spread throughout the HOA world regarding the ‘mortgage blacklist’ that could impact the resale ability of condominium and co-op associations. The ‘mortgage blacklist’ refers to a list of HOAs that Fannie Mae, a major mortgage financier, deems ineligible for conventional loans. This list is not public, and condo owners and associations usually learn of their inclusion only when a buyer's loan is rejected.
This is a cause for concern but, thankfully, managers and board members have an ability to check to see where their community stands.
Fannie Mae has introduced a new online tool to help associations check their eligibility status and identify any conditions that may be causing them to be unapproved. This tool aims to enhance the efficiency of condo/co-op lending and create a transparent environment that benefits all participants.
Why is Fannie Mae Eligibility Important?
Being “Fannie Mae Qualified” is important, as it allows individual consumers to get the most attractive mortgage terms. Lenders like to sell mortgages in the association to Fannie Mae, enhancing their liquidity, and enhancing their ability to make more mortgages available to other consumers. Providing a way for lenders to increase their liquidity by selling off their mortgages is the reason why Fannie Mae and Freddie Mac exist. Mortgages in associations not Fannie Mae approved for one reason or another will not qualify for sale to Fannie Mae, and become burdensome to the lender. In those cases, the consumer will be offered less attractive mortgage terms, which makes purchasing the home more expensive, which could potentially lower home values in the affected community.
Why Is a Community Ineligible?
Fannie Mae (and Freddie Mac) have minimum physical and financial standards for condo and co-op associations to appear on their “approved” list. For example, a minimum Reserve Funding rate of 10% of total budget is one of their criteria. Both organizations increased their scrutiny over which associations were and were not “approved” for mortgage purchases after the tragic collapse of Champlain Towers South in 2021. This led to an increase in the number of associations not approved. However, this also led to confusion among managers and board members regarding if their association was approved, and if not, why.
How to Establish if a Community is Eligible
Fannie Mae has released a website (https://condostatus.fanniemae.com) to provide managers and board members the ability to check if Fannie Mae is aware of any condition at the project that does not meet one or more of their published Selling Guide (B4-2) requirements. This website creates transparency into the association’s Fannie Mae approval status by explaining why the association may not meet their published requirements.
How to Use the Tool
Managers and board members can access the information by registering on the website (https://condostatus.fanniemae.com) and searching for their community by providing appropriate identifying information (name, address, tax id#…). Homeowners and potential buyers may also ask the manager or a board member to look up the association to learn the status in advance of any upcoming sale, purchase, or mortgage event.
What to Do if Your Association is Not Fannie Mae Approved
Associations can remedy any identified conditions and are encouraged to work with the mortgage lenders currently working with individual buyers so that their lenders can submit clarifying documentation to Fannie Mae. Once received by Fannie Mae, they will review the information to determine if an update to the project status is appropriate. If the association remains on the unapproved list, Boards and Managers can encourage their homeowners and potential buyers to work with lenders to explore other financing options.
With this new online tool, Fannie Mae has made appropriate adjustments to enhance the efficiency of their condo/co-op lending process and created a transparent environment that benefits all participants and drives sustainable homeownership.
Bryan Farley is the President of Association Reserves, CO and has completed over 3,000 Reserve Studies and earned the Community Associations Institute (CAI) designation of Reserve Specialist (RS #260). His 14+ years of experience includes all types of condominium and homeowner associations throughout the United States, ranging from international high-rises to historical monuments.
By Emily Wigdale, Front Steps
Artificial Intelligence (AI) is rapidly reshaping the financial landscape of homeowner's association (HOA) management. AI offers a unique opportunity to improve operational efficiency, elevate accuracy, and drive smarter, data-informed decisions. As a form of digital “safety equipment,” AI protects financial integrity, reduces manual workload, and enhances transparency. Yet, with these advancements comes a critical need to balance innovation with thoughtful human oversight.
In the financial operations of HOAs, AI delivers significant value. Automated systems can reconcile accounts, track expenses, and forecast budgets with greater speed and precision than traditional manual methods. AI can detect irregularities in transactions, optimize cash flow strategies, and support compliance with local and federal financial regulations. These tools strengthen fiscal responsibility and help ensure sound decision-making for the community.
AI-enabled tools like automated payment systems, digital invoice processing, and intelligent fraud detection contribute to smoother financial operations and faster reporting. Real-time data analytics offer actionable insights into reserve funding, capital planning, and long-term financial health. These capabilities improve clarity, reduce delays, and allow HOA leaders to make informed, forward-looking decisions.
Communication around financial matters also benefits from AI. Routine payment reminders, fee breakdowns, and account updates can be automated through secure messaging platforms, minimizing errors and administrative time. For HOA managers, this reduces repetitive tasks and frees up time to focus on strategic financial planning and stakeholder engagement.
However, adopting AI in HOA financial management must be approached with care. While automation is highly effective for data-heavy processes, tasks such as interpreting governing documents, reviewing financial agreements, and validating high-impact transactions still require human judgment. Accuracy, nuance, and contextual understanding remain essential.
This is where human expertise becomes indispensable. Managers play a critical role in verifying AI outputs, ensuring compliance, and identifying inconsistencies that automated systems may overlook. Rather than replacing human input, AI should enhance capacity and reduce manual strain, allowing managers to focus on high-value oversight and community trust.
AI is not a substitute for financial professionals or community leadership. It is a powerful partner, working in support of clearer operations, stronger accountability, and more confident in resource management. With thoughtful implementation and ongoing oversight, AI can help HOAs achieve a new level of financial transparency, efficiency, and long-term stability.
FRONTSTEPS is a leading provider of community management software, offering integrated tools that help HOAs streamline operations, enhance communication, and strengthen financial oversight. This article was written by Emily Wigdale, Director of Marketing at FRONTSTEPS.
By Jason Stephenson, Founder of Indygo Community Association Management
Homeowners associations work hard to keep communities running smoothly, plan for future costs, and protect property values. Even with the best intentions and solid annual budgets, unexpected expenses can pop up - whether it’s emergency roof repairs, major infrastructure work, or insurance premium increases. When savings aren’t enough, HOAs might need to consider special assessments, loans, or revising the budget to stay on track. Each option has its own benefits and considerations, and understanding these tools can help board members make decisions that are clear, fair, and financially sound.
Special Assessments:
A special assessment is a one-time fee that homeowners might be asked to pay to handle unexpected expenses. It’s often the fastest way to raise funds when reserves are low. In Colorado, HOAs need to follow specific procedures, as outlined in their governing documents and the Colorado Common Interest Ownership Act (CCIOA). These procedures might include giving notices, voting by the board, and sometimes getting approval from members.
Pros:
- Immediate Funding: Helps address urgent needs quickly.
- No Long-Term Debt: Unlike a loan, it doesn’t add interest or future obligations.
- Direct Responsibility: The current owners share the cost and also benefit from the improvement.
Cons:
- Owner Pushback: Homeowners might be surprised or upset, especially if the fee is large.
- Financial Hardship: Not everyone can handle sudden costs, which could lead to missed payments or resentment.
- Community Tension: Poor communication might erode trust in the board.
Association Loans: Sharing the Cost
If a special assessment feels stressful or daunting, considering a loan could be a helpful alternative. HOA loans can support significant projects and allow for manageable payments spread out over several years, often resulting in smaller increases in dues gradually.
- Lower Immediate Impact: Monthly payments are easier for homeowners.
- Preserves Reserves: Keeps emergency funds available for future needs.
- Faster Project Completion: Work can start without delay, as payments are spread out.
- Interest and Fees: Loans come with extra costs, increasing the total expense.
- Long-Term Commitment: Repayments may limit future budgets.
- Board Authority Limits: Depending on rules, loans might need owner approval.
Proactive Budgeting and Reserve Planning
The best way to avoid last-minute financial stress is through careful planning and strong budgeting. HOAs should regularly conduct reserve studies, ideally every 3–5 years, to assess future needs for common areas and set savings goals. While Colorado law encourages building enough reserves, it doesn’t specify exact amounts, making these studies essential.
Budgeting Tips:
- Review Annually: Keep budgets up-to-date with rising costs like insurance, utilities, and labor.
- Build Buffers: Include contingencies for unexpected expenses.
- Be Transparent: Clearly share budget goals and challenges with homeowners.
Choosing the Best Approach
There’s no one-size-fits-all answer. For urgent issues like a sewer main break, a special assessment or emergency loan might be necessary. For long-term projects like roof replacements, using reserves is usually best. Boards should consider community makeup, legal rules, and how much homeowners are comfortable with when making decisions.
Recommendations:
- Stay Prepared: Regular reserve studies and planning help you get ready for big expenses.
- Communicate Clearly: Keep homeowners informed about dues, assessments, or borrowing.
- Seek Expert Advice: Financial advisors, legal experts, and management companies can provide valuable guidance.
In the end, how an HOA handles surprises can build or break trust, stability, and community health. By understanding options like special assessments, loans, and good budgeting, Colorado HOAs can face unexpected costs with confidence and integrity.
Jason Stephenson is the CEO and Founder of Indygo Community Association Management, a forward-thinking company dedicated to modernizing HOA operations across Colorado. With a passion for innovation and community, Jason leads Indygo with a commitment to transparency, efficiency, and exceptional service.
By Michael Kelsen, R.S, Aspen Reserve Specialties
You have successfully completed the task of reviewing and accepting the Reserve Study prepared by your professional. Most think this well executed plan is a pipe dream made up by the professional. It is not. Many years of knowledge and expertise went into this document to help you better prepare for future projects. The Reserve Study is a budget tool that will map out how to address future capital expenses. So, what do we do with it now?
First off, use it as a guide to determine where your assessments should be set. Do not determine your Reserve contribution in “reverse order”. All too often, we have seen an association start with what the dues were for the previous year, subtract all your operating expenses (insurance, management fees, utilities, service contracts, etc.), then arrive at the Reserve contribution with what is leftover. This is the wrong approach. Typically, the Reserve contribution makes up a large percentage of the total assessments. To properly establish your budgeted income, go through all the operating expenses, then add the Reserve contribution recommendation to arrive at the total assessment level.
Use it as a guide for upcoming projects. While we all would like to tout ourselves as being capital project psychics, we are not. Anything can happen at any moment. But, through our experience, we have a great idea of when a project will need to be addressed. However, we are not perfect, so when we are recommending that a project is addressed, the Board of Directors should evaluate the project and if they agree with our opinion, get some bids and recommendations from reputable contractors to perform the work. Also, use the estimated costs your Reserve professional provides as a comparison to the bids being received. The professional has no vested interest in the estimates, so based on their expertise, the number should be within a small percentage of bids being received.
Analyze major projects coming up in the next 5 – 10 years, but don’t lose sight of projects beyond that either. The major projects within the next 5 – 10 years will require special planning and funding to complete the project in the right manner. By properly funding the Reserves, it will allow you to choose the best contractor for the project, not just the cheapest.
Keep a history of Reserve project contracts in an electronic file. Often, a Board or community management will change, and by keeping the contracts easily accessible, future management and Boards will have information as to when projects were last completed. Provide those contracts to the Reserve professional when they are preparing the study so they can utilize that information for the report. This will ensure that actual costs are being used for the current report since we all know every association is different and costs could vary from community to community.
Review the document frequently. In addition to reviewing the report at least twice a year (early part of the year to go over this years recommended projects and later in the year during budget season), the report should be updated by a professional at least every two years. After a full Reserve Study (Level 1) is completed, we recommend performing a Level 3 (financial review) at least 2 years later to update projects that have been completed and update the estimated replacement costs. Two years later (4 years from the initial full report), a Level 2 (on-site and financial review) should be completed to ensure components are aging as expected, as well as updating the estimated costs. We all know how often costs are changing every year and if too much time is allowed to pass between updates, the further behind in Reserve planning the association may be getting themselves into. In a sense, we recommend the Reserve Study is professionally reviewed at least every two years.
Share the results of the study. The entire membership, as well as potential home buyers, should have access to the report. In a world of transparency, the homeowners have the right to have the history of Reserve recommendations, and how the board has followed through with its fiduciary responsibilities, at their fingertips. Homeowners should be able to pull up the report from a secured portal so they can review it at their leisure. In addition, Reserve Studies are becoming a household name, and potential buyers into the community has a right to know the financial health of an association and what they are facing once they become an owner in your community.
The Reserve Study can be a very valuable tool for the association that will help the community maintain or enhance the property values by utilizing it in the right way. The initial shock factor may seem daunting, but in the long run, you will be better off by living in a community that is well maintained and gives you pride to come home to a beautiful home.
About the Author: Michael Kelsen, R.S. (#32 in the nation), PRA (Professional Reserve Analyst), has been conducting Reserve Studies since 1991 and has personally completed over 7,500 reports in his career. In 2001, Mike left the company in which he received his experience to start Aspen Reserve Specialties and is proud to be soon celebrating our 25th year in business. His passion is educating the community about the importance of Reserve Studies and stress that we are not here to raise your dues, we are here to help you protect and enhance your property values.
By Wes Wollenweber, Jachimiak Peterson Kummer, LLC
Construction disputes between associations and contractors often illustrate in hindsight what should be in a vendor contract with a construction professional to protect the community. Nasty disputes with contractors over mechanics’ liens against every unit owner, general contractors who stiffed subcontractors – who then lien the community, and a wide array of other issues, there are truly some contract terms associations should consider inserting into a construction-based contract. While it’s not possible to be bullet proof in a dispute with a contractor, there are ways to limit harm and protect a community. These are the critical clauses that can help prevent certain litigation, make it less expensive, and certainly strengthen the association’s rights under the contract.
• For contracts where the vendor is the general contractor who will use subcontractors and/or suppliers of materials, it is recommended to have a clause that states the general contractor will ensure that it pays all subcontractors and material suppliers promptly upon payment by the association and will fully indemnify the association should any subcontractor or supplier attempt to record a mechanics lien against the association’s property and/or unit owners for nonpayment. While subcontractors who get stiffed by an unethical general contractor who the association has paid can sue under Colorado’s constructive trust statute, associations have no statutory standing to do the same. As such, associations need to protect themselves contractually against the unscrupulous contractor who stiffs his subs and/or suppliers. This suggested clause, requiring indemnity, accomplishes that task.
• A clause that requires the contractor/vendor to identify any agent working on the community’s project who is not an employee; meaning a subcontractor or independent supplier. This lets the association, its community manager and general counsel know who’s out there working on the project and thus have some amount of foresight in identifying issues that may be brewing and help the association in avoiding being blindsided by a disgruntled subcontractor.
• On bigger projects, it is also helpful, if possible, to have a clause that states the association will only pay the contractor’s invoices in tandem with the execution of lien releases. Lien releases create what attorneys call a “condition precedent” in a construction contract and mean that the contractor cannot be paid until it releases any right to a mechanics’ lien for the work on a particular paid invoice. These lien releases can provide powerful protection to a dispute later on where the contractor claims nonpayment and then records a mechanics’ lien. This clause sets up proof of payment and the release of lien rights by that contractor.
• Attorneys’ fee clauses: Fee-shifting clauses (the ol’ familiar “prevailing party shall recover its attorneys’ fees and costs) do not always make sense in construction contracts. However, for associations, it makes sense because if a contractor tries to act on a mechanics’ lien that is not valid, the association can only get attorneys’ fees under the Colorado mechanics’ lien statutes if it proves the lien is overstated. There are other bases by which an association may dispute the contractor’s invoice besides the dollar amount, such as defective work, and having an attorneys’ fee clause helps the association in that instance.
• Delays: For bigger projects, the association truly needs a well written and specific clause that deals with contractor delays. General counsel can help with these clauses and should focus on defining “delay,” the consequences of delay, and consider liquidated damages related to the delay. Delays are specific to the project. Colorado case law supports damages for a contractor’s delays when the damages are hard to predict before the delay that breaches the contract. Setting the liquidated damage clause in the contract creates a real incentive for the contractor to not allow unnecessary and costly delays to occur.
• Workers compensation: With many contracts, it makes sense to have a clause that specifically states the contractor is required to carry requisite workers compensation insurance for its workers and agents and that the association cannot be liable for any such violation. Many contracts have this but be on the look for those that do not and insist that this type of language is inserted.
Addressing these areas will potentially identify other potentially necessary clauses. At a bare minimum, using the above suggested clauses as a check list of what to have in a construction contract will help protect associations when certain conflicts arise that can be costly and lead to ongoing litigation that could have otherwise been prevented or limited.
Wes Wollenweber is Of Counsel at Jachimiak Peterson Kummer, LLC. Wes is a lawyer, mediator, and arbitrator with 26 years of litigation experience in federal and state courts in Colorado. Wes routinely handles HOA disputes, employment civil rights cases, fair housing matters, landlord-tenant cases, construction disputes, among various other areas.
By Chris Stubbs, Clean View HOA Financial
In just the first quarter of 2025, over 68,000 U.S. properties entered foreclosure—a 14% increase from the previous quarter and a troubling signal for communities nationwide. A key driver? Soaring HOA dues, which have been fueled by inflation, rising insurance premiums, and escalating service costs.
However, there's another, often-overlooked culprit: inefficient collections processes. Many homeowner associations still operate without strong AR (accounts receivable) systems or compliant, proactive collection policies. This leads to preventable financial strain—not just for individual homeowners, but for entire communities as well.
Why Staying Current on Collections Is Critical
Even a few delinquent accounts can have a harmful ripple effect on your community. Therefore, staying on top of collections is crucial for the following reasons:
Collection Requirements Are Evolving Nationwide
States across the U.S. are beginning to tighten requirements for HOA collection practices. Boards should expect (or already be subject to) new standards such as:
Even if your state hasn’t passed similar legislation yet, it’s wise to prepare now and standardize your collections in line with best practices.
The Hidden Cost of Unpaid Dues: Financing the Gap
When owners fall behind, HOAs often need to bridge the gap with loans or special assessments. But borrowing isn’t free:
Ultimately, the cost of financing unpaid dues is paid by everyone—not just the delinquent owner.
Best Practices for a Healthy Collections Strategy
To protect your community’s financial health, it’s crucial to implement a collections strategy built for transparency, fairness, and sustainability. Here are some key steps to take:
Partnering with Financial Experts Makes a Difference
Effective collections require consistency, empathy, and legal awareness, which is why many boards choose to work with a dedicated HOA financial partner. A dedicated HOA financial partner can help communities:
Final Thought: Collections Are About More Than Cash
Collecting dues is crucial for funding your community—but it also plays a key role in building trust, maintaining fairness, and staying ahead of legal and economic change. A well-run collections process ensures that:
Now is the time to audit your collections process, prepare for future regulatory changes, and reinforce your financial foundation.
About the Author:
Chris Stubbs is the CEO of Clear View HOA Financial, which provides comprehensive financial management services for HOAs. With over 20 years of experience, he leads a team known for expert support and exceptional service, delivering precise financial oversight for community associations.
By Carly Spengler, Haven by Neighborhood Management Inc.
As managers, we view our relationship with clients as a true partnership—one built on transparency, communication, and mutual understanding. A key component of this partnership is ensuring clarity around cost structures, particularly those outlined in what is commonly referred to as “Schedule A” or “Addendum A” of a management contract. This document should be clearly communicated and fully understood by all parties and never buried in the fine print or treated as an afterthought.
Whether you are a board member evaluating a new management proposal or a homeowner reviewing your community’s invoices, it is essential to understand the purpose of Addendum A and how to extrapolate its contents.
What Is “Addendum A” and How Does It Relate to the Management Contract?
Addendum A is a legally binding supplement to a management agreement. It details specific costs and services that fall outside the scope of the base contract, providing additional context or clarification on items that may incur extra fees. Common inclusions are:
These costs are not typically included in the base monthly management fee but rather billed as they are incurred. As such, Addendum A plays a crucial role in ensuring the association only pays for what it uses, benefiting both the client and the management company.
Why Is an Addendum A Important?
Many management companies choose to separate ancillary fees from their base contract. This model provides flexibility for:
Additionally, Addendum A can often be updated separately, without needing to renegotiate the full contract. This offers adaptability as the community’s needs evolve.
Watch for Superseding Clauses
Some terms in Addendum A may override provisions in the original agreement. Language to watch for includes:
These phrases indicate that Addendum A takes precedence over the original contract where conflicts exist. Some contracts may allow Addendum A to be updated unilaterally, so it's important to review how changes are governed and approved.
Ask Questions Before You Sign
Before agreeing to the terms of Addendum A:
Understanding the addendum is vital. It is a legally binding part of your agreement and can have lasting financial and operational implications.
Final Thoughts
Reading the Addendum A carefully can help you avoid unpleasant surprises down the road. While it may appear to be just another piece of legal documentation, its impact on your community and your relationship with the management company can be substantial. Treat it with the same seriousness as the main contract and never hesitate to ask for help when in doubt. As stated, transparency is paramount when entering into a new management agreement. It is not just a best practice, it’s a responsibility. When both the board and the management company are aligned on expectations and costs, it strengthens the relationship and lays the foundation for long-term success and continuous partnership.
About the Author
Carly Spengler is the Director of Association Management at Haven by Neighborhood Management Inc. Haven is a boutique management firm located in Broomfield. With three years of industry experience and certifications including CMCA and AMS, Carly focuses on building authentic relationships with clients and team members while promoting ongoing education within the industry.
By David Ford-Coates, Alliance Association Bank
Many community associations contemplating large-scale capital improvements first look to fund their needs with cash reserves. While fully funded reserves are ideal, many associations aren’t fully funded. For day-to-day operations, a good rule of thumb is that maintaining at least 70% reserve funding is adequate for meeting the National Reserve Study standard of reserve adequacy, according to Association Reserves, a leading reserve study provider.
For one-time or unexpected projects, an alternative to depleting your reserves is to obtain a loan with a bank that specializes in association lending. The following overview provides a basic game plan for financing your association’s capital improvement with loan funds.
Step 1: Gain borrowing approval
The first step is to contact your association’s management company and attorney to assess the steps to obtain approval to enter into a loan. Your loan will be secured by an assignment of the association’s assessments or other collateral. Governing documents differ as to the authority to pledge assessments and the approvals – whether Board or Owner approval – to do so.
Step 2: Determine a repayment plan
Next, the association needs to determine what means you will use to repay the loan. For smaller loans, an increase to regular monthly assessments may be a feasible way to make loan payments. Another option could be implementing a special assessment wherein each unit owner would pay upfront or participate in the loan program.
In either case, you’ll need to consider the board or homeowner approval(s) necessary to implement the desired repayment structure. You won’t need to have the structure in place before you apply for the loan, but in most cases, the structure will have to be approved before closing the loan. However, putting an increased regular assessment or special assessment in place before you apply for a loan can demonstrate to your bank that your association has both community support and the ability to repay the loan.
Step 3: Choose the type of association loan
When applying for a loan, your bank will want to know what type of loan and loan term you’re seeking. For large, lengthy projects, your bank will likely offer the option of entering into a non-revolving line of credit for the construction period. These lines of credit typically last six to 24 months. During that time, you’ll make interest-only payments on the amount drawn.
When construction ends, the line will convert to a fully amortizing term loan. A typical term loan is for five to 15 years. It is important that the loan length not exceed the useful life of the financed improvements — you don’t want to be paying for improvements that have outlived their lifespan. If the project is smaller or short-term, it may make sense to forego the draw period and immediately enter into a term loan. The sooner you begin paying the principal, the sooner your association pays off the loan.
Step 4: Prepare for the application process
When your bank evaluates a loan request, it may use several key metrics to gauge your association’s credit risk and ability to repay the loan. Some factors the bank may consider during the underwriting process include:
Delinquency
Banks consider the number of accounts and the total amount of delinquencies. Many banks allow no more than 10% of accounts to be delinquent for 60+ days. Strong credit means your association’s delinquency rate is less than 5%.
Liquidity
This measure considers your association’s cash amount as a percentage of annual assessments and annual debt service. Many banks have a minimum liquidity requirement of 20% of the association’s annual assessments. With strong credit, your liquidity levels are greater than 50% with at least one year of debt service.
Size
More units or homes provide a diversified cash flow stream.
Assessment increases
Large increases may cause delinquencies to rise. Strong credit involves increases of less than 25%. If a significant increase is necessary, implementing it before applying for the loan can mitigate your risk.
Annual assessments related to market value
Annual assessments should not be greater than 10% of the unit value. Strong credit comes with yearly assessments that are less than 2% of market value.
Owner occupancy and concentration
A high percentage of investors not living in their respective units poses more borrowing risk. Banks consider an association to have strong credit when more than 80% of units are owner-occupied, and multiple-unit owners control less than 10% of the units. Banks may consider an association to have weak credit when less than 60% of units are owner-occupied, and multiple-unit owners control more than 20% of the units.
Management and capital planning
Ideally, your association will have an external professional management company with experience managing similar capital improvements. Having a professional reserve study that is at least partially funded indicates prudent financial planning.
If your association has ratings of fair to strong in most of the factors above, you will have higher chances of being approved for a loan.
About the Author: David Ford-Coates is the Vice President of HOA & Special District Banking for Alliance Association Bank, a Division of Western Alliance Bank. Member FDIC.
