Why is it taking so long to collect delinquencies? Can we close the pool to the deadbeat? Why cant we collect on that judgment? These are questions that too many board members and managers ask ... mainly because there is no collection policy.
A clearly worded, communicated and enforced collection policy is the solution to collections. A collection policy simplifies one of the Boards most disagreeable tasks: collecting money from neighbors. Since the course of action is predetermined, the Board doesnt need to wring its hands over each case. Here are some of the essential components:
Payment Date: ___ of the month
Payment Late: ___ of the month
Late Fee: ___
Finance Charge: ___ per month
Payments applied to oldest balance first
Type of notices 10 Day Notice to Pay, Notice of Intent to Lien, etc.
Who provides the notice association, attorney
When account is referred to an attorney
Collection costs paid by the debtor
HOA has right to obtain a personal judgment garnish wages, attach personal property, etc.
Amenities pool, tennis court, clubhouse are suspended for delinquencies of a certain dollar amount
For the record, photocopy a check from each owner when received, whether delinquent or not. The information will be valuable if collection is necessary and may save a 100 - 200 "skip trace" cost later.
There is no law that says HOA fees must be paid by check. Even the banks are pushing to eliminate this archaic form of payment. The Board can enact an policy to require that HOA fee payments be made automatically by autodebit. Payments are made directly to the HOAs bank account so that the inevitable delay of manual deposits is eliminated. No more "checks in the mail" excuses. There are so many advantages to this collection mechanism, it should be an absolute must for every HOA whether professionally or self-managed.
Getting a judgment or lien doesnt guarantee payment. In most jurisdictions, a collection can receive up to 25 percent of a debtors "disposable" wages after withholding. Ask all owners for work phone numbers for "emergencies" with a pool or car registration form.
There may be more than one owner on each unit title. Make sure all applicable names are on the notices. A title company can assist with this information. All owners are equally responsible for the entire debt.
Liens alert lenders, purchasers and title companies of a "cloud on title" that needs to be cleared up. For this reason, long standing delinquencies often get cleared up at refinancing or sale closings. A recorded lien improves the odds of collecting even if an owner files bankruptcy or a lender forecloses. If the lender forecloses, the association can collect if there are surplus proceeds. If there is no lien and the property is sold, the association has no claim.
After several rounds of written notices and 60 days have passed, turn the matter over to the HOAs attorney. Cease communications with the debtor. Referring all calls to the attorney will expedite the process. One attorney letter often does the trick.
Many association governing documents allow the association to withhold access to amenities like pool, parking, even voting. If allowable, do it.
Shut Off HOA Provided Utilities Sometimes, drastic action is called for. Your collection policy can call for shutting off utilities like water this may require a plumber.
Theres no magic money tree for HOAs. If one member doesnt pay, the rest must. To ensure that the HOA bacon is brought quickly home, invoke these collections correction today
