Why is it taking so long to collect the HOA 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...often because there is no formal 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 their 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
All collection costs charged to the debtor
Association has right to obtain and execute on a personal judgment (garnish wages, attach personal property, etc.)
Amenities (pool, tennis court, clubhouse) are suspended for delinquencies of a certain dollar amount
Copy 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.
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.
Give Notice to 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.
Don't Accept Checks Marked "Paid in Full": Cashing checks so marked could be considered binding. Make sure the amount truly is "paid in full" before depositing.
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 refinancings 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 association attorney. Cease communications with the debtor. Don't discuss repayment agreements, collection costs or payoff information. Referring all calls to the attorney will expedite the process. One attorney letter often does the trick.
Suspend Privileges: If your HOA governing documents allow withholding access to amenities like pool and parking, do it. Shut Off HOA Provided Utilities In some cases, drastic action is called for. Your collection policy can call for shutting off association paid utilities like water, if all other measures to collect have been tried and failed. This may require a plumber.
Since HOA budgets are typically lean to begin with, letting delinquencies drag on will impact the ability to provide required services. If all don't pay, the rest will have to. Take collections seriously by adopting a comprehensive Collection Policy and get after it. A sample policy is available .
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