by Jacqueline C. Marzan, Esq., Jay Steven Levine Law Group
Condominium associations are corporations that are either “for profit” or “not for profit.” Homeowners’ associations are not for profit corporations. The term “not for profit” can be misleading in that a not for profit corporation’s intended purpose is not financial gain; however, this does not preclude a not for profit from making money*.
Here are a few ways that condo associations and HOAs can make money**:
- Consider the investment of reserve monies in secure, accessible investment vehicles. Consult with your accountant or bank liaison as to available instruments which could gain value but are still accessible in the event the need arises and which carry no penalty if withdrawn early (such as certain certificates of deposit which are FDIC insured; note that maturity terms vary).
- Condominium associations can charge owners use fees for the use of common elements or association property if the Declaration of Condominium so provides or a majority of the members of the Association vote to allow it or the charges relate to an owner having exclusive use of it.
- Using community bulletin boards to showcase a paying vendor’s advertisement could produce a steady stream of revenue. Care should be taken to not alter boards or to commit to unreasonable contracts. How about selling ad space in a community newsletter? If the community is large enough, vendors may be very willing to commit to regularly run an ad in a newsletter circulated to Association members.
- Is there a service that the Association could provide that would make money and benefit its members? For example, there are some condominiums that have on-site restaurants which earn a profit.
- Review your expenses. Is your utility bill correct? Generally, common areas in condominiums and cooperatives are exempt from paying State sales and use tax in the purchase of electric power. However, if the areas are used for commercial purposes, there could be an issue (see other suggestions in this list). Consult with your Association attorney if there is an issue to consider or plan for in this regard.
- Renting out vacant parking spaces or rooftop areas to wireless carriers are possible areas where the Association could charge a fee and realize a revenue stream. Renting out clubhouses (for events) or tennis courts and pools (for groups which give lessons) are also viable options although the liability is certainly a consideration when dealing with potentially dangerous activities.
- Saving money could also make you money. Review service contracts for terms and termination provisions to determine if an opportunity exists to renegotiate a contract. This is true for almost any contract the association is a party.
- Of course, there is always moving quickly on collection efforts when dealing with delinquent owners. Associations should utilize suspensions, assignments of rent and collection tools to the greatest extent possible.
Associations should always confer with its Association attorney for clear guidance on its course of action with respect to relevant laws and its governing documents.
Does your community association make money? If so, how do you do it? Let us know in the comment section below.
*Please consult with your Association’s accountant for the treatment of revenue and its tax implications.
**Always consult with your Association attorney for alteration or other considerations prior to committing to any item mentioned in this article.