By: Michael Rome, J.D. The articles below are not a substitute for consultation with legal counsel.

Raising annual dues is one of the most unpopular actions taken by an association board… maybe even more so during these difficult economic times. Following are five ways for an association to increase revenues without raising dues.

Consider Initiation Fees. Initiation fees are becoming a common way for associations to obtain more capital. An initiation fee is a one-time charge paid to the association during the purchase of a property. These additional funds can help reduce, or at least delay, increases in assessments. The amount for an initiation fees typically ranges anywhere from fifty percent of the annual assessment up to the same amount as the annual assessment. In order to charge an initiation fee, the authority to do so must appear in the Declaration of Covenants or Condominium. An association interested in amending its Declaration to include initiation fees should consult with legal counsel.

Charge Closing Letter Fees. When a property is sold or refinanced, the closing attorney’s office requires a written statement from the association regarding any delinquent assessments. This document goes by many names; estoppel letter, certificate of account, and clearance letter… to name a few. Self-managed associations are often not aware they can charge fees for providing a closing letter. The amount of the fee varies depending on State law and the governing documents, but is often between $25 and $100. There are additional expenses and costs an Associations may be able to charge within the closing letter; such as document fees (for providing a copy of the governing documents to the purchaser), owner transfer fees (changing the owner information in the association’s records), and charges related to providing pool keys or entry cards. It is important to consult with legal counsel to determine what fees your association can charge in your State.

Keep Dues Current. Annual budgets are based on the assumption that all the homeowners will promptly pay their assessments. Delinquency rates for an association typically range between five to twenty-five percent… and sometimes, even more. This can amount to a significant shortfall of funds, and could result in the need to increase assessments. Residents are generally aware whether or not a board is slow or lax in collecting assessments. If the board is lax, more of the owners will be slow in payment. The key to keeping down delinquency rates is for the association to be prompt, consistent, and persistent. A late fee should be charged immediately on all past due amounts, and any accounts more than 60 days in arrears should be sent to an attorney for collection.

Reduce Insurance Costs. Reducing the costs for insurance can result in more available funds. The typical insurance premiums for community associations can vary significantly from year-to-year and from company-to-company. It may not be efficient to shop around for new vendors every year, but when it comes to insurance coverage, obtaining competing estimates every couple of years may produce substantial savings. Also, some insurance carriers have safety programs and measures that could reduce premiums.

Decrease Collection Costs. Don’t throw good money after bad. Attorney fees for collections can quickly add up. Many law firms charge their fees upfront, and/or on an hourly basis. This can result in paying out attorney fees that are greater than the amount the association is trying to collect. For example; if a law firm charges $2,000 to record a lien and pursue suit to collect $1,000, the association is now out $3,000… that they may never see again. There is a recent trend for some law firms to ‘defer’ payment of their fees, or a significant portion, until the funds to cover them have been collected from the delinquent homeowner. In other words, the law firm only gets paid if they collect. This approach has some obvious advantages. The financial burden for collections is now shifted from the homeowners who pay on time to the delinquent homeowners, and the attorney has a shared interest with the client to collect the outstanding amount. In short, associations may save thousands of dollars or more in attorney fees.