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.