Board Member FAQ: Collecting HOA Dues After a Sale

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As a community association board member, you hope that your neighbors stay in your community for years. But sometimes, circumstances cause a member to sell a home and leave. If that member is behind on dues or assessments, that can leave your community holding the debt. You need to know where to turn to collect after the sale.

Members leave community associations for all kinds of reasons. They may have to relocate for a job. Maybe their families are growing and they need to expand. Or maybe they are hoping to avoid fees. When a sale happens while dues are outstanding, it can cause problems for a community association.

Collecting from the Selling Homeowner

If a sale is pending when a person is behind on their HOA dues, you may want to try to collect from the homeowner before he or she goes to closing. During the sales process, a title insurance company will investigate the state of any unpaid assessments. If there are unpaid dues, it could cause a buyer to renegotiate or even walk away from the sale. Because of this, a selling homeowner may be willing to resolve an outstanding claim to avoid problems during closing. This can sometimes be challenging if the resident moves out of state. The community association is best off working with a collections specialist to collect unpaid HOA dues before the sale is final.

Collecting from Co-Owners

If there is more than one person living in a home in your neighborhood, it could give you more options to collect your HOA assessment. Anyone who co-owns the property will most likely be covered by your community association’s rules. If you cannot collect from one owner, you can pursue another. This most often comes up with vacation properties, or in the case of divorce. When co-owners separate, they may agree on who is responsible to pay the debt. But if collection efforts with that party fall through, you may still be allowed to pursue a claim against the co-owner as well.

Collecting on an HOA Lien

As the collections process progresses, your community association may also have a claim against the property sold. Depending on your community association bylaws and local laws, unpaid assessments may create a lien on the home or condo. A lien protects your community association from the risk of unpaid assessments by filing a claim against the property. If a lien has been issued against a home or condo, the overdue assessment will be paid out of the proceeds of the sale of that property. Usually the seller’s mortgage and any home loans will be paid first. But a lien ensures that the community association gets its money before the seller is paid.

A sale can complicate the collections process and leave your community association holding an empty debt. Careful planning and proactive collections practices can make sure your assessments get paid, even after a sale. If your community association is facing collections problems, or you wish to have a plan in place in case your community faces an issue, contact Equity Experts to receive an expert’s assistance.

Board Member FAQ: Collecting Delinquent Community Association Dues

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

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

What do you need to do to collect unpaid assessments?

Not every community member is going to pay their dues on time. Sometimes, homeowners will feel the amount is excessive, or it doesn’t fit within their budget. But delinquent dues can send a community into financial crisis quickly. If your community 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 board of directors 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. For recommendations on this, email our team at [email protected].

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 community 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.

If you are having trouble collecting unpaid community association dues, the experts at Equity Experts are here to help! Contact us at (877) 279-6977.