FAQ Delinquent HOA Dues

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In a perfect world, a homeowners association would send out its annual assessment and all its members would happily pay their HOA dues.

But when reality falls short of ideal, how do you deal with delinquent HOA dues?

What do you need to do to collect unpaid assessments?

Not every community member is going to pay their HOA dues on time. Sometimes, homeowners will feel the amount is excessive, or it doesn’t fit within their budget. But delinquent HOA dues can send a community into financial crisis quickly. If your condo association can’t collect the dues it needs, you won’t be able to maintain and repair its facilities.

So what can you do about it?

Check Your Bylaws

Before you begin collections, make sure you check the language in your bylaws and other governing documents. Most HOA foundational documents give the HOA board the right to take action against delinquent homeowners, but not all of them. You may need to amend your bylaws before you do anything else.

Impose Late Fees & Interest

Consider adding late fees and interest to your annual homeowners assessment. If there is no penalty to paying a bill late, it often doesn’t get paid at all. Interest and late fees give your members a reason to pay on time: it saves them money.

Send Out Demand Letters

Before you can take any legal action against delinquent homeowners, you need to put them on notice. Send out letters to unpaid accounts that say:

  • The total amount due;
  • How late the payment is;
  • How much interest and late fees have been charged;
  • Warning of future collections efforts.

You may also want to offer a payment plan in the notice, giving your homeowners a way to get caught up over time. Some states may even require payment plan options, so make sure you check your local laws.

Get a Lien on the Delinquent Property

Your homeowners association can also secure your interest in the property by getting a lien. This is a note in the public records that you are owed a specific amount of money. If a delinquent homeowner tries to sell the home, you get paid out of the value of the sale.

File a Lawsuit

If all your collections efforts fail, you can sue a delinquent community member for the past-due assessments, fees, and interest. How and when this is done depends on the law in your state. However, once you obtain a judgment, you can use it to get your money from the person’s income, bank accounts, and even tax returns.

When Foreclosure Is the Final Option

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Countless Americans face foreclosure when their lending institutions are unable to collect mortgage payments. In an ideal world, no one would ever face foreclosure – for any reason. But that world does not exist. Banks and other lenders foreclose on homes when owners default on their loans. Although relatively rare, association-initiated foreclosures are occasionally required to recover delinquent assessments.

It’s important to remember that homeowners choose where to live, and by choosing to live in a community like ours, they accept a legal responsibility to abide by established policies and meet their financial obligations to the association and their neighbors.

Association Budgets

Associations rely largely – many exclusively – on homeowner assessments to pay their bills, which can include landscaping, garbage pickup, pools, street lighting, and insurance. For condominiums and cooperatives, these costs include building maintenance, utilities, and amenities enjoyed by all residents.

You trust our board to develop realistic annual budgets. We base our assumptions on careful cost projections and anticipated income primarily from assessments. Our budgetary obligations do not change when some owners don’t pay their fair share. Common grounds still must be maintained. Garbage must be collected. Utilities and insurance premiums must be paid.

When homeowners are delinquent, their neighbors must make up the difference or services and amenities must be curtailed. The former is an issue of fairness; the latter can lessen the appeal of the community and erode property values.

Liens and Foreclosures

When an owner fails to respond to repeated attempts to collect the debt, the association can be left with little choice but to place a lien on the property. The magnitude of this decision requires an approach that is fair, reasonable and consistent and that complies with applicable laws, practices, and procedures set forth in the governing documents that guide our decision-making.

We believe homeowners facing foreclosure deserve a reasonable opportunity to appeal to the leaders of the association. Knowing that people occasionally face financial hardship—a lost job, for instance – we will try to work with homeowners to bring their accounts up to date.

Nobody wants to foreclose on a home – not a mortgage banker and certainly not our association.  However, the threat of foreclosure is often the only tangible leverage an association has to ensure fairness and shared responsibility. Without this option, many residents would simply choose to default on their obligation to their association and neighbors.  How many Americans would pay their taxes if the government had no means of enforcement?

With each additional delinquency, an association’s financial position can become increasingly precarious, a situation that is exacerbated in a depressed housing and economic climate.

Placing a lien on the property, with the ability to foreclose, is typically enough to get delinquent residents to meet their financial obligations to the community – without removing the owner from his or her home. When that fails, associations turn to the final – and unfortunate – option of foreclosure. 

We want you to know that we understand the magnitude of this decision and why it may occasionally be necessary.

Above all else, association leaders are responsible for sustaining the financial viability and stability of the association. As noted earlier, our budgetary obligations do not change when assessments aren’t paid. Services residents expect must be provided; the community must be maintained; bills must be paid; and our investments and property values must be protected.

Equity Experts is an established leader and innovator in the association collections industry–Please give us a call at 855-321-3973 to see how we can help your community recover delinquent funds!