Paying an Unfair Share

R.E. from Litchfield County, Connecticut writes:

I just got a letter from the President of the Board of my condo informing me that a 20% increase in common fees is going to be necessary because more than 20% of the unit owners were currently more than one month behind in paying their common fees. This delinquency in common fee collection has caused a budget shortfall and the association can’t pay their bills without the increased to common fees by the folks that are paying. I always pay my common fees on time. This isn’t fair. I never agreed to pay for deadbeats who aren’t paying their share. How can I avoid paying extra for people who aren’t paying their fair share?

Mister Condo replies:

R.E., common fee delinquency is far too common a problem for common interest communities all over the country these days. We are not immune from the epidemic here in Connecticut. Your Board President is likely going to take a lot of heat for bringing the issue to the forefront of the community but that is his job. I am sure that your sentiments are similar to others in your community that pay their fair share in timely fashion. It is a shame that your fellow unit owners are not as conscientious as you when it comes to paying their common fees on time.

Having prepared numerous annual budgets, I can offer a little insight into the factors that are leading to your situation. Common fees are derived by taking the association’s annual expenses based on history and factoring in likely or known increases in the coming year. It is part science, part math, and part crystal ball. No one can foresee every expense but an experienced budget preparer can get a good feel for what is likely to occur in the next twelve months. Once the total amount of likely cash outlay for the year is determined, it is time to look at the income side of the equation. The most likely source of income is common fees. Using a fairly simple formula, the suggested common fee is derived. Your fair share is your per centage of ownership multiplied by the projected annual expenses divided by twelve to arrive at your monthly common fee. When everyone pays their fair share on time, it really is that simple.

Delinquency occurs when the common fee payment obligation is not met by the individual unit owners. Delinquency needs to be taken into account when preparing the annual budget or there can be dire consequences to the community. If your community is experiencing a 20% rate of delinquency, then it is not unreasonable for the Board to request an extra amount in common fees from the paying members to make up for the delinquency. Otherwise, when the bills come in for the commonly paid for items the association will not be able to pay. That could lead to major disruptions in service and far worse.

Imagine your association not having the money to pay for its insurance policies. Imagine no grounds keeping services. Imagine no routine maintenance or snow removal. These items cannot go unpaid so the Board is being diligent in assuring that the association has enough money on hand to pay for common services as called for in your by-laws.

As for the delinquent unit owners, you may find some consolation in knowing that their delinquency does not come without a cost to them. Often, they are burdened with the additional costs of the association hiring a collection firm to pursue the delinquent unit owner for payment. In the worst case scenario, the association can foreclose on their unit to collect delinquent common fees. Once those monies are recaptured you may receive relief in your common fees or even a refund. That may not make the sting hurt any worse today but it may give you some repose in knowing things can and do get better. This challenging economy has directly impacted condo associations in our state. I hope that your association survives this fiscal challenge and that this increase to your common fees is only temporary.