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What is the association's liability for letting debts become uncollectable?

Association Boards have a fiduciary duty to manage debt and pursue the best financial condition for the association. A key to maintaining a healthy financial condition is managing debts.

Excessive debt can impact the entire association in numerous ways, including new requirements by Fannie Mae and Freddie Mac which place a greater level of responsibility on the association board to proactively manage delinquencies. These organizations will not allow financing for potential owners if the association’s delinquency level is too high. This has the potential to drive down property values and stigmatize the association in the resale community.

Also, if too much outstanding debt is accrued, associations miss budget goals and are forced to seek other means to make up the difference. They may have to increase association dues or issue special assessments. Unfortunately, this approach further burdens the co-owners that pay their assessments while simply increasing the delinquency of those that are not paying.

Boards owe it to themselves and their neighbors to act quickly when a unit owner becomes delinquent, and to act aggressively when it becomes clear that the delinquent unit owner is not taking action to correct the issue.

 

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