Why is it taking so long to collect delinquencies? Can we close the pool to the deadbeat? Why can't 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 Board's most disagreeable tasks: collecting money from neighbors. Since the course of action is predetermined, the Board doesn't 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
Copy Assessment Payment Checks. 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.
Auto Debit Payments. 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 HOA's bank account so that the inevitable delay of manual deposits is eliminated. No more "check's 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.
Get Work Phone Numbers. Getting a judgment or lien doesn't guarantee payment. In most jurisdictions, a collection can receive up to 25 percent of a debtor's "disposable" wages (after withholding). Ask all owners for work phone numbers for "emergencies" with a pool or car registration form.
Notice All Legal Owners. 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.
Record Liens. 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.
Let the Attorney Handle It. After several rounds of written notices and 60 days have passed, turn the matter over to the HOA's attorney. Cease communications with the debtor. Referring all calls to the attorney will expedite the process. One attorney letter often does the trick.
Take Away Privileges. 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.
There's no magic money tree for HOAs. If one member doesn't pay, the rest must. To ensure that the HOA bacon is brought quickly home, invoke these collections correction today!