Financial Issues Facing Associations

A CAI document is circulating among the board, and is the result of a survey by the Community Associations Institute.

It was published in October and is entitled "CAI Survey: Associations Hit Hard by Housing, Economic Slump."

The survey has some interesting statistics, but it may not be very useful. According to the CAI, there are 310,000 community associations in the U.S.; the survey is based on the responses of 1,500 managers. That's less than 0.5% of the associations in the U.S. Nevertheless, there are some interesting statistics.

I've included a link to CAI's website and the published survey, in Note 1 of this post.

Thomas M. Skiba, CAI's Chief Executive Officer is quoted in the survey:

"High delinquency rates put a lot of pressure on associations to meet their obligations to the homeowners who are paying their fair share....When some owners—including banks that have foreclosed on homes and now own them—don’t pay their share, other homeowners often must make up the difference in higher regular assessments or special assessments." Mr. Skiba goes on to say that "Many associations are also forced to curtail services, which can further depress property values," and that "Association boards strive to maintain the nature and character of their communities and meet the established expectations of all homeowners, but that’s often a daunting task in this kind of environment. They are making difficult choices because they have few alternatives. Board members in every community association manage the business of their communities, and businesses must pay their bills."

It would seem that vigilant collection procedures are necessary or, failing that, associations face falling revenues and with them, falling property values.

Of the 1,500 associations that responded for the survey, these are the steps that are quoted as being taking to "address budgetary shortfalls":

• 38 percent have postponed planned capital improvement projects.
• 35 percent have reduced landscaping services.
• 31 percent have reduced contributions to their reserve accounts, funds that are set aside for major maintenance and repairs.
• 23 percent have borrowed from the association’s reserve account.
• 16 percent have levied special assessments.
• 12 percent are allowing residents to perform minor tasks in the community.
• 6 percent have borrowed from banks and other lenders.

Comments, Corrections, Omissions, References

Note 1. This is the link to the published CAI survey:


CAI - Association Survey, October 25, 2010

Note 2. Mr. Skiba's statement that "When some owners....don’t pay their share, other homeowners often must make up the difference in higher regular assessments or special assessments" is not news to this association. Earlier this year, our attorney attended an association meeting and addressed the owners and the board, and answered questions. He stated exactly the same thing, but used somewhat stronger language, and went so far to state that collections procedures must be rigidly and diligently enforced. He stated that not to do so is "unfair" to the other unit owners, because they must make up these differences. So now we have this from several competent sources.