Friday , 28 November 2014
Breaking News

Setting Uniform Collection Policy for Condos, HOAS

MITCH DRIMMER, CAM

Condos and HOAs have been plagued with owners not paying their dues to the association. This has always been a problem but it has not become a crisis until the last five years when delinquency rates have soared. Before the meltdown the banks were the first to act and the problem was often solved by their taking action. Now with banks reluctant to foreclose on units a new dynamic exists that requires boards of directors to take action because the banks will not.

The question remains is what action does the board take and when does it take it? The first thing that has to be done is to have the board of directors sit down and establish a “uniform collection policy” that conforms with its governing documents, and, as with any business decision, needs to be tempered with good business judgment. If a board of directors has a “selective” approach regarding its actions, it is doing the association a disservice, and perhaps even putting the association in harm’s way if there is selective enforcement of a collection policy. By not taking quick action it is also doing a disservice to the delinquent owner, because by allowing a delinquency to grow, owners will often find themselves way behind and impossible to dig their way out.

The first thing that must be determined is the time line as to when action is taken. The second thing that needs to be done is to determine what the form of that action will be. Thirdly, if the association has to bring in outside help, it needs to make a decision as to who will be their collection provider, for it can be a collection company or an attorney.

So let’s talk about the time line. Every board of directors knows when a payment is due, the grace period, and when a payment is past due. This information is often in the association’s very own governing documents. The next step is to establish a plan as to what will be done after the first payment is late. Why not send a kindly-toned letter reminding an owner they have missed a payment and to please be sure to send it in right away. This “courtesy letter” should be sent out within a week of the expiration of the grace period.

The next step on the time line is a difficult one but necessary for the board now needs to send the unit to a professional company to move the file forward. Associations can use their own legal consul or specialized collection agencies to engage owners and take action. When a unit goes this route, it is up to the board, but once determined to act, they also need to take positive action.

In my next column I will discuss the options and what “positive actions” can be taken.

Mitch Drimmer is a licensed CAM (Community Association Manager) and is the Vice President of Association Financial Services, an accredited collection agency, specializing in finance, business process outsourcing, and in community associations. For more information, visit www.associationfinancial.com Tel: 305.677.0022 ex 804.

 

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