Keeping Your Association Afloat

We have all watched as the economy has taken a massive downturn. As individuals suffer, so do the communities that they live in, specifically homeowner associations. Bankruptcies, foreclosures, short sales and abandoned properties are all too common. Individuals who are unable to meet their financial obligations are forced to decide if they should make their car payment, mortgage payment, or homeowner assessment payment. With so many people facing financial strain, it is important that homeowner associations let their owners know their bill must be paid first and, if it is not, there will be serious consequences. It is no surprise that when people have a hard time meeting their financial obligations, they are forced to play this juggling game, and—if they believe their association will not take aggressive action for months or even for years—they will opt to pay their homeowner dues last.

In order to aggressively collect, associations need a plan-of-attack. First, the association should have a clear and concise collection resolution that outlines the steps that will be taken if an owner is delinquent. The resolution should set out the late fee that will be charged, as well as the interest rate. Once an owner is sixty days past due, a lien should be immediately placed on their property. The lien will provide recorded notice that the owner has an outstanding debt to the association to anyone searching the county records; this will also ensure that, if the property sells, the association will be paid. Second, once the owner is six months delinquent, a lawsuit should be filed so that a personal judgment may be obtained against the debtor. The judgment will appear on the debtor’s credit and can be enforced for ten years. Once a judgment is obtained, the best means for collecting is to garnish any bank accounts that the debtor may have, garnish wages, and garnish the rent if it is a rental unit.

An association can also get creative in collecting by denying delinquent owners access to commons areas such as the pool and workout room. Other creative means are deactivating key fobs, restricting the ability of delinquent owners to rent out their units, and cutting off electricity and water service (if the association provides these).

In order to implement the above strategies, it is important that the board work closely with their manager and their attorney to accomplish swift collections. Owners within the community will talk, and—once they hear of the hard approach that the association is taking—they will think twice about choosing to not pay their dues. Finally, remember: when taking the hard line approach of aggressively collecting assessments, not only are you attempting to collect from the delinquent owners, but you are also sending a message loud and clear that the association must be paid on time from each and every owner.