Prior to the economic downturn that began in 2008, there were many portfolio managers, who managed associations that had never experienced the financially crippling effects of numerous delinquencies. Because they were so rare and infrequent, there was a tendency toward leniency and inconsistency, and legal action was rare.
But when your neighbors cannot pay their association dues, the balance radically shifts and those who can pay must pay extra just to keep the grass mowed, refuse removed and roofs from leaking. In harder hit associations, reserves are compromised to fund basic monthly operating costs.
In association management there are certain recurring themes and truisms. One of these is to be proactive. To be the smart little piggy that built his house of brick (before the troubles with the big bad wolf began).
To manage delinquencies, the first proactive step is to develop a sound delinquency policy that is enforced systematically and without prejudice. After a thorough review of the association documents, your state statute and the federal Fair Debt Collection Practices Act, a policy resolution can be drafted and adopted by the board of directors. A clear statement of the community collection policy would include:
- Due date.
- Grace period.
- Late fee amount and/or payment penalty amount.
- Timing of collection letters, which can range from polite reminders to outright demands. They are often sent by the managing agent on a 30-60-90 day schedule, or, in difficult times, on a 15-30-45 day schedule.
- When the matter will be turned over to the association attorney.
- When a lien will be filed of record.
- When foreclosure will begin and/or alternatives to foreclosure, such as collecting rent from a tenant or termination of common utilities and privileges/services.
- Priority of payment, indicating how payments are applied since courts have indicated support only for unpaid assessments.
A copy of the policy must be made available to all owners. The board has a duty to consistently track all delinquencies and enforce a fair policy for all owners. Your association’s legal counsel should be able to assist in the drafting and refinement of the policy resolution regarding collection of delinquent assessments.
Being prepared and acting quickly will help reduce and manage certain delinquencies. The squeaky wheel does get oiled . . . many individuals who are deciding “which bills to pay this month” will pay those that present the biggest risk of loss for nonpayment. Your association’s dues will be put near the top of list if the owner realizes he may lose his home if he doesn’t pay. Of course, there are those who are in dire financial straits and will not be able to pay regardless of your efforts, so other means will need to be engaged. However, with a collection policy in place, you now have established a plan of action that will help mitigate delinquencies by every legal means available.Share