When homeowners don’t pay their assessments, a community association should immediately refer to its collections policy.
Collections policies, which help ensure that all owners are treated equally, typically have timelines for how long an owner has to make a payment before the issue is turned over to a collections attorney. It might outline payment plans if the association is willing to offer one. And it should explain legal actions if there’s no response.
A general framework for a collections policy might be:
- If an owner is 15 days delinquent, a first-notice letter will be sent by the board or community manager.
- If there’s no response within 45 days, a second delinquency letter will be sent. This is a good time to double check for an up-to-date email or address for the owner.
- If 60 days elapse, and there’s no response, the policy may note that the matter will be turned over to an association attorney, who will send a demand letter. The next step may be recording a lien or, filing a lawsuit against the owner—or as a last resort, foreclosing on the property.
“Because of the speed and seriousness of the process, a lot of accounts get resolved at the 60-days stage,” says Chantelle Neumann, lead attorney with Hirzel Law’s collections department in Farmington, Mich. She adds that many owners who are in denial or ignoring requests often will pay when threatened.
A collections policy should comply with the requirements of community governing documents, state statutes, and the Fair Debt Collection Practices Act.
Community association assessments help maintain roofs, sidewalks, streets, and landscaping. They also pay for popular amenities such as a community pool, playgrounds, fitness centers, and activities.
Owners who don’t pay on time are cheating their neighbors and the community they live in. The financial position of a community has a direct effect on every member, particularly if it forces amenities to be curtailed. Late payments can cause cash flow problems for communities with a tight budget and, over time, can lead to diminished property values.
Owners who have legitimate reasons for late assessment payments should contact the association board or community manager to discuss financial obligations and alternative payment arrangements.
>>Read “Insert Payment Here” from CAI’s Common Ground magazine for an overview of assessment collection policies and strategies.