Six Ways to Reduce Communal Bills in Homeowners Associations
Over 27,000 homeowners associations (HOA) have been established in Ukraine, while only two years ago there were 15,000 of them. There are numerous reasons why the HOAs appear now as mushrooms after rain. These reasons include escape from the lazy or incompetent ZhEKs, over-the-top bills for building maintenance and the desire to modernize housing on their own in order to pay less for heating.
But there are even more benefits in establishment of the HOAs which are not so widely known. HOA may receive all sorts of financial benefits. What exactly – read in the article prepared by the joint project of “Obozrevatel” and the USAID Municipal Energy Reform Project in Ukraine.
The thing is, the apartment owners are simultaneously co-owners of the whole multi-apartment building. According to the Ukrainian legislation, common property in a multi-apartment building includes: auxiliary premises, common areas, mechanical, electrical and plumbing equipment which services more than one premise, bearing structures, building envelope, land under the building, building territory and structures on it. Simply put, everything which is common in the building itself, plus the building territory, i.e. courtyard. And sometimes this property may pay for itself, as they say, – i.e. it may partially cover its maintenance.
But we should remember that it is impossible to simply make money and distribute HOA proceeds between the apartment owners. Because a HOA does not pay taxes and remains a non-profit organization until the proceeds described below are spent for maintenance of a multi-apartment building. Therefore, it is possible to reduce the bills for maintenance of the building and building territory almost to zero, but you cannot bring money to every apartment or throw a huge party.
Six ways to cut communal bills through HOA establishment
1. Rent out property!
2. Negotiate with providers about payment of fees!
3. Place advertising!
4. Participate in local housing and communal sector development programs!
5. Sort waste!
6. Allow lessees to use structures in courtyard
Method 1. Rent out property!
Often, there are auxiliary premises in the multi-apartment buildings, and they may be interesting to the potential lessees. All you need to do in order to receive money for lease, is to establish a HOA and take a decision at its general meeting that the premises will be rented out. Then, the HOA concludes a contract with the lessee and receives monthly lease payments to its accounts.
Method 2. Negotiate with providers about payment of fees!
These days, practically every multi-apartment building has Internet and cable TV. This means, there are providers that make money on these services. But do you know that all these providers must pay fees for use of common property of the co-owners? And these are additional funds, not using them is a gross negligence.
Method 3. Place advertising!
Did you see many times the billboards placed on the buildings? And now imagine how much placement of this huge advertising on your building may cost a month? Add to this advertising in the elevators, on the special ad boards and in numerous specially designated places. All this is money that the HOA may receive by allowing the advertisers to make money! Of course, there must be legal grounds for this, i.e. contracts with the HOA and consent of the co-owners.
Method 4. Sort waste!
One cannot say that waste sorting has already become a trend in Ukraine. But some HOAs are already using it as a saving method. For example, HOAs in Lviv not only save themselves but they are also ready to teach the others. And this is just the beginning, as the Ukrainian legislation is exactly in the process of improvement in this aspect, therefore it will soon become easier to receive certain proceeds due to sorting.
Method 5. Participate in local housing and communal sector development programs!
There are many such programs in every region. The most popular is “Warm Loans” program, a national program to support the energy efficiency measures which may reduce the bills due to thermal insulation of buildings. Also, the local programs called to strengthen this national program are being created on the same principle. By the way, in 8.5 months of 2017 the HOAs and housing and construction cooperatives received 560 “warm loans” in the state banks worth UAH 120 million. This means that these measures are very popular.
But in addition to the “energy efficiency” programs, there are also local programs to support the HOAs, one should just look for them and fill out an application properly – then you will have high chance to modernize your building very inexpensively.
Method 6. Allow lessees to use structures in courtyard
One can receive income from lease of not only auxiliary premises, but also of the building territory. If there are other structures in the courtyard (for instance, former boiler house which is no longer used) owned by the co-owners, they also can be rented out to the lessees who can open a shop or a warehouse in them. Certainly, they will also pay fees for use of these premises.
More details on how some of the HOAs already exercise this right – in episode one of Season 3 of YOUR HOME program! You will also learn from the program a lot of interesting information: DIY project on how to make a trendy shelf with LED lighting, how to make a gym or billiards room inexpensively in your building’s basement, and a lot more useful facts from HOA practice.
And how the HOAs can spend the money they receive and save? We already wrote – you can reduce monthly bills for maintenance of the building and building territory for every apartment with this money. Also, the money saved through these 6 methods can be accumulated in the building renovation fund for future independent or co-financed (see item 5) repairs of the elevators, replacement of lamps in the staircases with the energy saving lamps, or even thermal modernization of the building! You can even spend this money to hire a landscape designer for decoration of your courtyard. Everything depends here on your fantasy and arguments to persuade other neighbors – because a decision on how to spend the HOA income is always taken at the general co-owner meeting!
USAID Municipal Energy Reform Project in Ukraine