Homeowner assessments keep the HOA running and fund community upkeep, amenities, utilities, insurance, reserves, and more.
When assessments are not paid, these services become harder to provide. High delinquency rates for assessments can result in deferred maintenance, lower reserve fund contributions, and increased assessments.
So, what can you do about it? Let’s get into our guide on how to handle when homeowners are delinquent on payments!
First, the association’s governing documents outline what is considered to be delinquent. The documents also allow the HOA to levy assessments and charge late fees, which creates a lien on properties within HOA, granting the HOA right to a homeowner’s property if their debt is not paid.
This lien always exists, but the HOA can act on it when a property becomes delinquent on assessments. When the homeowner signs the closing documents for their property, they agree to pay the assessments and acknowledge the lien.
To address delinquencies, the HOA should have established standard billing policies that are included in the governing documents. Make sure to review your documents for the existing rules and consult with your legal counsel to draft or amend the policy, if needed.
A good billing policy should communicate to homeowners the assessment rates, due dates, and consequences for non-payment. Possible ramifications for delinquency may include incurring late fees and interest, revoking privileges to amenities, and publishing liens or pursuing foreclosure. This written policy makes the billing process easier and helps maintain consistency in its enforcement.
Generally, billing procedures should start with a notice sent to the delinquent property, followed by late fees and revoked privileges. If after a designated time the homeowner is still delinquent, then the account may be sent to the association’s management or attorney to escalate the issue.
Lastly, the HOA should consult its legal counsel if they want to pursue the lien and foreclosure or file a small claims case. For more information on liens and foreclosure, check out our article, Foreclosures vs. Liens: What Are They, What Do They Mean for the HOA?
It’s important to communicate the purpose of assessments to homeowners so that they’re aware of the impact of non-payment on the community as a whole. Also, simply having a conversation with homeowners with past due accounts before applying fees or taking away privileges may help rectify the situation. Additionally, offering payment plans and different payment options, as allowed by documents and state law, may assist homeowners in being able to pay their assessments.
Ultimately, be consistent in enforcing the billing procedures, as unfairly carrying out consequences can lower community trust and, more seriously, result in liability. Make sure to partner with your management company and legal counsel to review the options for your HOA when it comes to handling delinquencies.
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