Acting as a homeowners’ or condo association board member often involves making demands of your neighbors. When those demands take the form of unpaid association dues collections, you need to be careful. Make certain your HOA or COA is following the law for collections by following these do’s and don’ts:
Do Have a Formal HOA Dues Collections Policy
Not every condominium complex or homeowners’ association has a written, formal dues collections policy. Federal law doesn’t require them. However, there are several state and federal laws that control how an HOA or COA collects overdue association dues and assessments. Preparing a formal HOA dues collections policy can help you make sure you stay on the right side of these laws. A well-written homeowners’ association collection policy should:
- Define the assessments and dues the HOA may impose
- Set due dates and overdue dates when dues are considered “delinquent”
- Describe any fees or interest the HOA will charge
- Outline the steps the HOA will take for delinquent assessments
- Identify collections agencies or attorneys the HOA will work with to collect debts
Don’t Enforce Condo Association Dues Collections Unevenly
As board members, you may empathize for a neighbor you know is having a hard time. You might also want to “throw the book at” a condo owner who causes trouble. However, uneven enforcement of your condo association dues collections procedures can make it harder to take uncooperative property owners to court. Your policy may allow you to make exceptions based on need. However, there should be formal process for requesting relief, and for making sure board members consider each request in good faith.
Do Have Payment Plan Options Available
One way to accommodate COA members with cash flow issues, or who simply forget to write their assessment check is to make payment plan options available. There are ways to automate the collection of regular COA dues and allow property owners to sign up for automatic payments. You could also allow them to break up annual assessments into monthly or quarterly payments. This will help your community have the money it needs to maintain the property without the need for collections.
Don’t Arbitrarily Add Late Fees, Fines, or Interest to the Bill
The threat of interest and fees are a good way to make condo owners pay dues and assessments on time. However, association boards can’t just make these up as you go along. Any late fees, fines, or interest must comply with consumer protection laws and generally should be included in the association agreement your property owners sign when joining the community.
Do Send Notices of Delinquent Assessments
It may seem like an unnecessary step, but often sending your property owners a notice of delinquent assessment can save homeowners’ associations time and trouble collecting those unpaid amounts. Be sure your notice clearly states how much is owed, and when it must be paid to avoid becoming delinquent. It should also describe the next steps the HOA will take – such as charging interest or sending the matter to collections – if the assessment becomes delinquent.
Don’t Violate the Consumer Protections Laws for Debt Collection
HOA assessments and fees are considered “consumer debts” under the federal Fair Debt Collection Practices Act (FDCPA) and the Michigan Regulation of Collection Practices Act. That means your HOA board must follow collections rules and regulations designed to protect consumers against “abusive,” “unfair,” or “misleading” debt collections. There are some technical requirements involved, so if your HOA decides to pursue collections, it is wise to work with a debt collector who is familiar with the federal and state statutes.
Do Work with an Attorney to Collect Delinquent Homeowners Association Dues
If informal efforts to collect your homeowners’ association dues or condo association assessments fail, it is time to call in an attorney. While debt collectors have a number of tools at their disposal, attorneys can take collections further. By filing lawsuits and issuing liens against the property, a real estate attorney can make certain delinquent assessments get paid.
At Lachman King, our experienced real estate attorneys have been helping condo and homeowners’ association boards manage unpaid dues and assessments for years. Our team can help you create and enforce a formal dues collections policy, so your board has the money it needs to maintain a beautiful and functional community. Contact us today to set up a meeting.