4 Ways to Recession-Proof Your Clients

No one can say for certain when the next recession will strike the U.S. economy, but one thing is certain — it’s going to happen.

Yet, despite the hardships many community associations suffered in the last round, some remain just as vulnerable as they were then. It may be up to their managers to nudge them in the right direction by taking proactive steps to address four critical areas.

In the previous recession, according to Mark Durakovic, a principal with Kass Management Services, Inc., in Chicago, many associations learned the hard way that they had insufficient reserves. “Repairs and projects began to become difficult to fund, and special assessments were difficult to apply as a result of the [owners’] financial hardship.”

Part of the problem is that associations tend to take it for granted that they can collect the dues they rely on for operations. That’s a mistake.

“If people are losing their jobs, they’re going to try to cut corners, and association dues are one of the things they’re less willing to pay because what are the repercussions?” says Dan Artaev, senior attorney at Fausone Bohn, LLP, in Northville, Mich.

“Yes, the association charges interest and threatens to put a lien on the unit, but what’s a $300 lien if you’re not planning to sell?”

Another reason for inadequate reserves is fear. “Associations tend to be afraid to save because they’re afraid of members coming to meetings and saying, ‘What are you doing with the money we’re paying you?’” Artaev says.

That comes back to bite the association during a recession, when its cash flow is lower but it still incurs expenses for maintenance, tree removal, landscaping, and the like that can’t be skipped. “Money isn’t coming in, and you want to reach into the reserve, and there’s nothing there,” Artaev says.

Clearly, then, associations need to plan for the potential shortfalls in cash on hand. That requires careful consideration of several areas.

To learn which areas your associations need to explore now and the steps they should take, read our new article, Prepare Now for the Next Recession.

Best regards,
Matt Humphrey

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