Community Association Collections…Righting A Wrong

There are over 65 million Americans living in Community Associations in the United States. Even in good times payments can be late or even ignored and that is not fair to the good paying owners in an association.  Maintenance fees are critical to keeping up the condition of a community association and therefore directly affect the quality of life in a condo or HOA.  Owners who have decided not to pay or even owners who pay late are hurting associations and creating shortfalls that result in increased maintenance fees or reduced services.  Its not actuarially fair because everybody has to pay their fair share.  So what is a community association supposed to do when the money is not coming in on time or not coming in at all?

The first thing a board of directors should do is have a prepackaged action plan with a well established time line to address these problems.  A Uniform Collection Policy is the first step to curing what every community association has to deal with, if not everyday then eventually.  The standard response to collection issues is to send the file to the community association attorney for resolution, and that may not be the way to go because most community association lawyers are not specialists in collection matters.  There is also the question of what the costs will be because as the old saying goes “litigation is the sport of kings,” and no matter how the issue is settled out there will always be an attorney bill waiting in your mailbox.  It is not the nature or the business model of attorneys to work for free, or in collection cases on a “contingency basis.”   It is also important to note that “deferred fees” does not mean NO FEES.  The most important thing a board needs to ask is; What are you going to do about these delinquencies and late payments?  It is important to keep in mind that when you are chasing delinquent dollars you will be using your own money unless you are engaging a company that is merit based, which means you will only pay for performance.  Look for operational excellence and outstanding reporting technology.  So what can be done to get some traction on your collections?

There are many proactive steps that can be taken aside from placing a lien and then foreclosing on a unit.  After the “courtesy letter” process is completed a board of directors needs to become resolute in the recovery of their money by sending the file to a firm that will provide steadfast and sure actions.  Such actions include but are not limited to:

1. UNDERWRITING: Which entails reviewing the ledgers, checking with the property appraisers office for the proper owner, checking for the mortgage, and making sure that your governing documents allow for late fees and late interest to be charged.
2. SKIP TRACE performed and a profile of the unit owner is put together which includes social security number, telephone numbers, employment history, and other information that relates to their residences.
3. INITIAL DEMAND LETTER (FDCPA Fair Debt Collection Practices Act compliant) sent via certified mail noticing the delinquent debtor that a collection agency has taken on the case and they are given 30 days to dispute the amount of the ledger provided.
4. INBOUND PHONE CENTER: It is critical that you have such a facility standing by, waiting to hear from the delinquent owner so that they can work out payment plans.
5. PAYMENT PLANS should be put in writing and allow for payments to be made by credit card, debit card, ACH, eCheck
6. OUTBOUND CALLS will be made with an eye to be respectful and mindful of the dignity of the delinquent owner.  They will be advised of the consequences of continued non-payment which include a lien being placed on the unit and that they will be REPORTED TO CREDIT BUREAUS.
7. REPORTING TO CREDIT BUREAUS: Reporting to credit bureaus is a very potent cure for late payers and delinquent accounts.

The only way to right the wrong of delinquent owners or late paying owners is to establish a Uniform Collection Policy that directs your association to the right company that can provide multiple solutions.