Community Association Collections…Payment Plans For Condos and HOAs.

Lots have been said and asked about the wisdom of working with delinquent owners in community associations, and allowing them to catch up using payment plans.  Some see it as a kind and wise decision and advocate that it is the correct approach.  Others seem to feel that it is unfair, and if a member of the association cannot pay on time they should be out.  Still others are convinced that most people who engage in payment plans wind up “falling off the wagon” and don’t finish up making the association whole.  My take on the subject simply is to consider the alternative.

If delinquent owners are not given the chance to engage in a meaningful resolution solution the only other alternative is continued non-payment, litigation, and eventually a loss to the community.  Payment plans were not part of the original grand scheme of things when associations were created, but are a necessity and should be allowed.  They should be allowed especially if an association has the ability to charge late fees and late interest which usually appear in their governing documents and by laws.  It’s not the way things were originally planned, but then again that is the nature of life and things happen that are not expected.

Payment plans should have a limit regarding the time involved in allowing a unit owner to catch up.  I have seen delinquent owners who owe thousands of dollars offer $50.00 a month, and that is not a payment plan but rather nothing more than a disingenuous donation.  Payment plans should be in writing and signed, and some states even require them to be recorded.  One state (Colorado) has even passed a new statute (HB 2013-127)  that requires associations to have collection policies, and if they include offering payment plans, then they must do so before they send a file off to an attorney or collection agency.  There is a lot of wisdom in that statute, as a community should have an opportunity to clean up a situation before it is brought into the public domain.

Payment plans need to be reasonable in that it should not put additional financial burdens on a delinquent owners who decide to come to the table and meet their obligations.  Such plans should also be to the benefit of the association immediately, and any funds coming in should go right away to the association instead of being held up until the entire debt is settled.  It’s also a good idea to offer multiple payment options to a delinquent owner on a payment plan such as credit card payments, debit card, ACH, or even cash payments through one of the many storefront operations who will handle such transactions.  If an owner does enter into a payment plan it is always best if an association can arrange recurring payments to be sure that the agreed upon payment is sent on time at the same time every payment period.

When your board of directors is putting together a uniform collection policy have them consider a reasonable and just payment plan option that will help the community and the delinquent unit owner.  It’s the right thing to do.

[vfb id=’6′]