Collecting HOA Dues: the Good, the Bad and the Proactive

As an elected board member, you have certain duties and obligations to the homeowners in your community. One of the most important of these is your commitment to protecting the financial health of the homeowners association (HOA). After all, the entire community depends on you to manage its money and keep its operations running smoothly.

 

Without sufficient revenue, meeting your community’s funding needs becomes difficult. Whether it’s a well-kept common area or a community pool, the benefits that community members enjoy depend on the income generated by the regular payment of dues. Everyone must meet this financial responsibility if your community is to thrive.
 
Most homeowners are conscientious and make every effort to pay their HOA dues on time. Still, you probably have some residents who do not make the connection between how well the community functions and how diligent they are about making timely payments.
 
You probably find the idea of chasing down unpaid dues a bit daunting. Texas associations, in particular, are under greater pressure to address delinquencies quickly since the statute of limitations for community association claims is only four years. Waiting too long to act could result in your association never recuperating lost revenue. No wonder so many boards await their pending delinquency reports with a sense of dread!
 
Fortunately, there is a more effective and legally sound approach you can take. Here we provide five guidelines for establishing a proactive collection strategy. Implementing this strategy will help you reduce delinquencies and, most importantly, protect the association and your homeowners.

1. Communicate the importance of timely payments.

Homeowners need to understand that timely dues collection is an essential element of a well-run community. Use as many communication channels as possible – newsletters, website postings, emails, flyers and meetings – to get the word out. Explain what is at risk to the community and the steps the association will take to collect delinquent payments.
 

2. Provide adequate notice.

Statements for assessment fees are typically sent at the same time each year so homeowners should be expecting them. A best practice is to send statements 30 to 45 days prior to the payment due date, unless otherwise specified by your governing documents. If the assessment fee is not paid by the due date, follow up with reminder letter(s) pursuant to your association's collection policy. Be sure to include the assessment and late fee amounts, as well as contact information where residents can direct questions and request a payment plan. This process affords the homeowner an opportunity to remedy the situation and can usually happen without the involvement of legal counsel.
 

3. Offer a payment plan.

Sometimes life brings unexpected surprises that can create financial constraints. Even the most responsible among us may need a little extra consideration from time to time. Providing the option of making several smaller payments over time provides a way for homeowners to address their financial obligations while demonstrating the association’s willingness to work with them. It is advisable, however, that the payment plan ensures that dues are brought up-to-date before the next dues cycle begins. This will help to prevent confusion and further delinquencies. If a payment plan extends past the next billing cycle due date, which is quite possible, it’s best to include the future billing amount in the payment plan.
 

4. If all else fails, seek legal assistance.

There’s a good chance that diligent and consistent collection efforts by the board will resolve most situations before further action is required. However, if you have not gotten a response from a homeowner after sending initial notices, it is possible that some greater issue is at hand. Your attorney can help to assess the full situation and make sure that bankruptcies and other types of potential judgements are not pending. Be aware that state laws dictate specific information you must send to a delinquent owner – as well as the delivery method you must use – before you can turn over the account to an attorney. Your management company should be able to clearly explain these requirements to you.

While it is never what you want, it is fully within the association’s right to file a lawsuit for foreclosure. This is typically a last resort, and most situations can be resolved before this final step becomes necessary.
 

5. Be firm, fair and consistent.

Work with your association management company to establish clear guidelines for your collections process, and remain dedicated to the plan. By establishing the proper expectations and following through consistently, your board will be demonstrating an objective commitment to do what’s right for the community. As a result, the association should also begin to see the number of on-time payments improve.

Managing delinquencies is never an easy task, but you can be more successful with a consistent, proactive approach. Partnering with an experienced HOA management team can help ensure your community stays on track when it comes to collecting dues.