How Do Federal COVID-19 Laws Affect HOAs?
It is a good idea to be aware of federal COVID-19 laws that directly affect homeowners associations (HOAs), boards, and residents. Since the White House signed the COVID-19 national emergency proclamation on March 13, 2020, Congress has passed laws providing tax incentives and special loan programs to stimulate the economy and support small businesses.
Other legislation has been aimed at protecting employees by mandating and incentivizing businesses to maintain payroll numbers and offer expanded paid time off, unemployment insurance, and medical insurance benefits.
If your HOA has full- or part-time employees and is straining to cover expenses and fulfill its commitments in the face of pandemic-related restrictions, it is important to familiarize yourself with federal COVID-19 laws.
The Families First Coronavirus Response Act
The Families First Coronavirus Response Act (FFCRA), became law on March 18, 2020, and aims to provide relief to employees who are forced to stay home from their jobs to self-isolate and care for themselves and/or family members. The law is also intended to assist employers who would otherwise have to shoulder this financial burden.
- Applies to employers with fewer than 500 employees.
- Bolsters paid and unpaid leave protections in the Family and Medical Leave Act (FMLA) and supplies employers with tax credits to offset these expenses.
- Temporarily mandates paid sick leave for employers with less than 500 employees.
- Calls for health plans, group health insurers, and government programs to provide free coronavirus testing.
Coronavirus Aid, Relief, and Economic Security Act (CARES)
The CARES (Coronavirus Aid, Relief, and Economic Security) Act was signed into law on March 27 and is the most comprehensive of the federal laws addressing COVID-19. It spans more than 800 pages and allocates more than $2 trillion to stimulate the economy and provide relief to individuals and businesses impacted by the crisis.
The following are provisions in the CARES Act that could affect HOAs:
- Emergency Small Business Loan program — Covered in more detail below, CARES provides expanded funding and revised qualifications for Small Business Administration (SBA) business loans.
- Credit reporting — If you offered a homeowner an accommodation for an account that fell behind after January 1, 2020, you cannot report it as “delinquent” to credit bureaus. Relevant accommodations include payment plans, deferrals, partial payments, and delinquency forgiveness for HOA fees and assessments.
- Eviction and foreclosure protection — Your association may not be directly involved with evictions and foreclosures, but these are real estate-related events that could significantly impact your residents. You may want to pass on information to those living in your community about how CARES can help them avoid eviction or foreclosure if their income has been affected by the COVID-19 pandemic.
- Employee Retention Tax Credit (ERTC) — Businesses, including not-for-profit entities like HOAs, may be eligible for a tax credit for keeping employees on the payroll during these uncertain economic circumstances.
CARES Act-Established SBA Funding Programs
As part of the CARES Act, the SBA revised existing programs and established other short-term emergency programs for businesses. These measures are designed to bridge the gap during COVID-19 closures and hardships and are intended for businesses with fewer than 500 employees, including not-for-profit HOAs and association management companies.
Paycheck Protection Program (PPP)
An expansion on a traditional SBA loan program, the PPP provides loans up to $10 million to eligible applicants to help them stay in business and keep their employees on the payroll. Payments are not due on the loan during the first six to 12 months, and the money can be used for employee wages and benefits including retirement, salaries, paid time off, and insurance premiums. The program also includes extra incentives to retain workers throughout the crisis.
SBA Economic Injury Disaster Loan (EIDL) Program
The SBA is currently only accepting new EIDL applications from agricultural businesses; however, they continue to process other entity applications if they were submitted before this restriction was imposed.
EIDL is a low-interest, long-term loan that furnishes up to $10,000 to assist COVID-19-impacted nonprofits and small businesses. EIDL money can only be used for essential operating expenses, not for extra expenses including bonuses, business expansion, or relocation.
Debt Relief and Bridge Loans
HOAs, association management companies, and other businesses that already have a relationship with the SBA can access additional federal economic programs. These include:
- SBA Debt Relief — SBA Debt Relief pays six months of the principal, interest, and fees on a current SBA loan for businesses that do not qualify for PPP.
- Express Bridge Loan Pilot Program — The Express Bridge Loan Pilot Program offers up to $25,000 to businesses already working with an SBA Express Lender to support them while they apply for other SBA loans.
Federal COVID-19 Laws and CINC to Help You Stay Solvent
With homeowners and tenants out of work and struggling to make mortgage and rent payments, many HOAs are feeling the pinch from delayed or diminished assessment income. Your HOA may one of the many struggling to cover expenses and execute obligations in the face of COVID-19-related restrictions.
Utilizing federal COVID-19 loan programs are a sensible way to help your HOA stay solvent. Coupling your loan benefits with the expense-slashing power of CINC’s all-in-one software platform is just plain savvy.
CINC’s multi-faceted system utilizes centralization, automation, and integration to help you cut costs and boost the profitability of your association management business. To request a free software demo, click here.
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