Examples of assessment payment plan due to hardship needed

We had a 6 month we liened policy. Which allowed us to have a payment plan in place to avoid a lien. The violation of not attempting to catch up on dues, allowed us to enforce the lien policy. I believe 6 months is a good time period to weed those full of bull or gives those with true financial issues the ability to catch up.

I had the people who knew they were going to be late or could not make a month's payment, the ability to pay half that month but in full the next without penalty. They still were a half month's payment behind but late fees were not added. That half month behind dues would follow them until they were able to catch up properly. With the 6 month policy in place this did allow them to stay up to 6 months behind without late fees until we were forced to put the lien in place. That's basically allowed them about a year of paying half dues before we enforced the lien.

You have to be as lenient as possible but deal with reality. Usually I would not enforce late fees onto those willing to make some kind of payment. I would even remove the late fees off the lien total if that got them to pay the lien off. We did keep the legal fee in place for filing the lien.

It's easy to be "tough" on those who blatantly do not pay their dues out of "protest", ignorance, or just don't do it. That's why the 6 month policy worked so well in weeding those people out. It's when you have those facing financial difficulties or living on social security that it is difficult. I liked to think we were as fair as possible to those who truly have issues but still have a firm policy in place.

It probably wasn't a perfect system but I only had one person who needed it. She was a good homeowner and attended meetings. It's just her job had issues and her pay was cut. That is why I created the payment policy. That way she could pay half and not fall into the lien danger. No reason to be mean when you have an honest person. It's a fine line...

I think a little more info should have been provided. Our assessments are monthly. Even though we establish an annual assessment, the CC&Rs specify monthly payments.

The owner requesting the plan has a history (over 5 years worth) of paying in full and on time. They are current in assessments and are being proactive with their request.

In doing some research, this is what I'm thinking of proposing to the Board:

Allow 1/2 payments for this years assessment over a two year period.
Late charges will still accrue, but will be waived if the agreement is fulfilled (or the account is brought current earlier). There will be no waiving of charges if the plan is not complied with.

Thoughts?

1/2 payments for year 1. Full payments for year 2 plus 1/2 payments from prior year to get caught up. Or are you going to make this an adjust-as-you-go policy? Is anyone going to raise the question of whether the financial problems are temporary enough to be resolved in time for the larger payments?

I agree with John 1000%.
You are opening the door for each owner to now be elligible for the same courtesy at a cost to the property.

This is a business to collect and manage the affairs of the community not make exceptions based on situations that should not influence the onwer's obligation to pay their fair share.

We have waived late fees on occasion when circumstances and payment history warrants doing so. I would not wish to sign up for a two year agreement which binds the association into a situation that benefits the owner at the expense of the property.

This is not a banking operation where you lend money and set payment terms on an individual basis. And as an owner if I were to be told this was agreed to I would be the first to cease paying my common charges to take advantage of this special treatment.

In many cases agreeing to such terms only allows this to drag on and the hole for the owner to get deeper.

This owner has the same obligation to pay their share just as others do take the emotions out of the situation and protect the interests of the property you serve.

then you would expect the cable company to cut your bill in half until no more money comes in ?

IMO your comparison is not equivalent

I would not do it for a 2 year period. My solution of the 1/2 dues for 6 months without charging late fees basically equals a year of 1/2 dues. After a year, then the plan needs to change to catching up plan. Which I would put as pay dues and a 1/2 each month for another 6 months. Still excusing late fees as long as paying and living up to the agreement.

This payment plan is a caveat to our policy. Which was 6 month we filed a lien IF you did not set up a payment plan. We basically advertised the policy of "6 months we lien, 1 year we consider foreclosure". The people who were truly having financial issues could then approach us to set up a payment plan after a meeting. I knew it was those type people who were honest and having true issues. They were most likely the type of person who took debt seriously. We did have open meetings but the collection reports were with the Board members only. If someone questioned why someone was not up with their dues, I would then explain that they had set up a payment plan and we are working with them. Would NOT mention them by name but it allowed people to see we made effort to collect against deadbeats and lenient with people who needed help.

I don't like people missing monthly payments and would charge them the late fees. However, if they knew ahead of time that they would need longer term help, then we set up a payment plan. An ounce of prevention...

possibly Tim has an attorney on retainer? if not that would need to be determined by the board. I simply agree with Tim's overall approach to his circumstance as it has been described by him. I agree some concerns are valid and in need of consideration. We don't know all the details of the hardship, only Tim does, so it's hard to judge.

While this is not an example of a payment plan per se, I thought it may be helpful.

PAYMENT PLAN STANDARDS

These payment standards are adopted to ensure a fair and reasonable approach for the Board in assisting owner's with past due obligations and in promoting the identified objectives whenever possible.

OBJECTIVES:

1. Refrain from interference with ownership rights;
2. Never ostracize, belittle or otherwise impugn the integrity of a delinquent owner(s).
3. Promote a harmonious relationship between delinquent owners and the Board, and members;
4. Cure delinquency as soon as feasible; and
5. Respect the privacy of the delinquent owner(s).

FACTORS FOR CONSIDERATION:

The Board shall consider all relevant factors in determining a payment plan that both promote the objectives identified above including, but not limited to, the following:

1. The circumstance, which has caused the delinquency.
2. Financial, health or other hardship of owner(s).
3. Loss of employment, income or suppport.
4. Divorce or death.
5. Current and future ability to pay.
6. Ability to cure delinquency within 12 months.

STANDARDS:

The Board shall use the following standards when evaluating and deciding on an owner's Request for Payment Plan.

1. The Board shall consider each Request for Payment Plan on a case-by-case basis.
2. The Board shall make best efforts to devise a payment plan that does not exceed (12) months of payments.
3. The Board shall include in the payment plan any future assessment(s) which will become due during the payment plan period.
4. The Board retains the right to modify already agreed upon plans in exceptional cases, where there is a changed circumstance.
6. The Board shall not arbitrarily refuse a reasonable Payment Plan Request.
7. The Board cannot forgive an assessment.

Board of Directors

Homeowners Association

Fiscal Year 2015

Any way you slice it, you are providing an interest free loan to one unit owner for a two year period with monies that do NOT belong to you.

Nor do you have the authority to do so.

As to this assuring some payment such an agreement in fact assures nothing.

To enforce any such contract would require a trip to the court increasing the property's costs even further.

My questions in Tim's case how many units make up his property? How many units are behind in their payments? Will this payment plan be offered to each of them and any future owners who are forced to miss payments.

Any contract entered into by a property which is to be prepared from scratch by two parties must be created or at least reviewed by an attorney.\

To suggest now most Board members have the ability to draft such a legal document properly would be IMO wishful thinking.

And speaking for myself my signature would never be found on such an agreement.

My thanks to all who responded. Definitively food for thought.

To answer a few questions:


We have 130 units. Our Association is extremely fortunate in the fact that we only have 5 lots who are 30 days behind and I expect that those were due to vacations (based on history). Over the past five years, we only have had one account go to collections and that was resolved once the attorney sent a letter. If the same circumstances existed (good payment history, proactive, similar hardship) I would support the same offer to others.

Our Association has offered options in the past for delinquent accounts (waiver of all late charges if brought current by mm/dd/yyyy), so there is some precedence already. This is the first who has been proactive prior to being delinquent in payments.


Excellent point on the issue of next year. Based on this response, I've pointed that specific issue to the member. I would want them to at least go into such an agreement with their eyes open rather then blinded by a possibility of a short term release. We are not set up to accept credit cards.


Although a future board would be bound to any agreement for this years assessment, they would be under no obligation to agree to additional relief for following years. The issue of if the hardship is temporary enough or not (excellent point by the way) is something that I will certainly bring up once the request is officially made to the whole board (which will be in February).


All good questions. Since we already collect on a monthly basis, spreading the payments beyond a year is really the only option available to help reduce (granted temporarally) the actual payment. We do have a line item in the budget to make up for late payments. This plan would require 1/3 of that line item. Although the minutes would indicate that the Board entered into a payment plan with one member, the details of the actual plan would not be released to the membership and no other mention of the plan (except for executive session minutes) would be publicized to the members. As far as the individuals future ability to pay, there is no real way to tell. I can only go on past performance which has been payments in full and on time.


Good wording for a response if the Board decides to not enter into a payment plan. Thank you.


Actually, we would not. We do not have an attorney on retainer. We have an attorney but pay on work provided. Based on previous issues, such a review would likely cost $150-$300. That amount simply doesn't make it cost effective to the Association. However, we do have a board member who is an attorney and I am fairly positive that they will have comments regarding the wording of any such agreement.


We do have a collection policy in place. That policy simply says that the Board has the authority to waive charges and costs of collections on a case by case basis. The standards you provided is a good one and I'll add it to the treasurer files.

This issue is a bit different to me because the member is approaching the Board prior to being delinquent in payments. The Association has forgiven late charges in the past to those who have gone almost a year with zero payments (in an effort to resolve the issue prior to sending it to collections). As others have said, it may be best to have some money come in then no money at all. Fortunately, it's not my decision to make. It's a board decision. Serving as Treasurer, I was simply the one contacted by the member.

I thank everyone. Every post had good discussion points and ones that I'm sure will be raised in the Boards discussion on the issue.

Tim

Tim

Your collections history is admirable. And you have managed to do it without unnecessary cost. Certainly, there is history that supports some form of temporary waiver. I'm sure you will come up with something that is fitting.

My only recommendation is that you label it a "pilot program." We do it when we are trying something new and aren't sure which way things will end up. As a pilot, there is no commitment to make the same offer to anyone else - and there is a prior understanding that the program will be terminated if the outcome does not work out as initially intended. Anything more could create false expectations.

Keep in mind that in the event of a foreclosure you are unlikely to be first in line. Make whatever agreement everyone is comfortable with and keep your fingers crossed. By taking it easy you will get some percentage of something as opposed to one hundred percent of nothing if you play hardball.

They may NOT be bound by an improper agreement.

The board MAKING said agreement, if in contravention to the Covenants, may become PERSONALLY responsible.

Simply FOLLOW THE COVENANTS.

ps. 'my' Covenants use the word 'shall' several times regarding the HOA's duties re: assessments

Tim's previous 'board' was (under) declarant control.

Let the actual Covenants govern.

No 'thinking' involved.

If you have the exact or similar circumstances and bring it to the Board's attention prior to being delinquent in payments, I would support it.


Obviously not.


Certainly a true statement. This is why we would notate entering a payment plan in the minutes (which nobody really reads outside the Board and not provide details or other mention of it. Of course, that won't help if a Board member or the individual requesting assistance tells someone (even though they should not).


Our late charge is 10% of the assessment. Payments are applied first to charges and then to assessments. In working out the math, the total late charges would be:

at 6 months: 69.58
at 12 months: 373.73
at 18 months: 956.63
at 24 months: 1,801.72

As you can see, there will certainly be a steep penalty for not complying with such a payment plan (paying 1/2 payment per month over 2 years). This would be in addition to approx $500+ in legal fees and other costs of collections once the issue would be turned over to the attorney (which in my mind would be done automatically).

I did say that we have waived late fees in the past for others. Typically it's only a month or two.

However, when I first took over being treasurer, the board agreed to waive all late charges to two members who were a year or more behind. This was my suggestion and done as a show of good will (since the previous treasurer/Board didn't pursue delinquent accounts). Basically, we approached the individual and said that the Board has already approved for the issue to be sent to the attorney on mm/dd/yyyy and you have two options to keep this from happening:

1) Pay the amount due by mm/dd/yyyy.
2) Pay the amount due plus the current year in full by mm/dd/yyyy and the board will waive all late charges not paid.

Both individuals accepted option 2.
1 member asked for additional time and we agreed to a 3 month extension providing they paid 1/2 now.

As I said, there is some precedence for payment plans.
The difference is, that this member is being proactive vs simply not paying.

Tim I am curious just what do your monthly CCs run?

And over 12 months at 1/2 rate that would free up _____________ dollars which pulls the property owner out of their hole.

We now have a foreclosure action on a unit owner who was offered several plans to catch up her payments. She failed to live up to any of them.
Her story was she simply did not have the money.

She drives a newer model car and does not hold a job. And once while walking through town I see her in the local nail salon getting a pedicure by she can't find a way to pay her share of the expenses to support the property. Your inability to manage your personal finances does not constitute cause to have you relieved of your monetary obligations. And to expect your neighbors to cover your shortfall for two years.

I am on a 5 member Board of a 7-year old 30 condo unit development. We are all new-ish to condo ownership and Board service. Two of us are in our third year of BOD service. We use a simple guideline for decision making. 1) we follow our by-laws - CCRs, governing docs etc. 2) we take care of our shared common areas. 3) we pass a budget each year that takes care of business. 4) we don't make any decisions that a future board could not follow/support/understand. Primarily, our decisions are uncomplicated.

Tim, when I first read your post, I thought "we could never do that - it's too complicated". It would require unrealistic diligence and comprehension on the part of our board and could cause issues with other owners.

Tim,

I'd weigh the hardship before granting a 24-month waiver of reduced payment. If it's concerning delinquent dues, then consider it since your board can simply proceed with collections in the event of default on the new deal.

I think our HOA board will create a six-month hardship consideration and then renew or reconsider the arrangement. I'd hate to see the board grant two years away with little flexibility.

No, this isn't much of an answer but it's something.

Again, I thank everyone for their postings. Good points of issue were raised and I'm positive there will be similar discussions within our Board.

Our Board won't consider the issue until February (our next meeting) and, like the member, I'm trying to be proactive as well so issues can be identified and a written agreement can be drafted for the Board to consider.

To answer Jon's question, the current assessment is under $100 per month.

I'm quoting Kerry, but I the question goes to everyone who has said that two years is simply too long of a time frame.

What would you suggest would be an appropriate amount of time (keeping in mind that our assessments are paid monthly per our CC&Rs)?

Please remind us Tim:
How much are monthly fees?
How much would it cost for a lawyer or collection agency if you had to go that route?

Assessment less than $100 per month

Legal costs for collection (having just gone through one) $500+

Annual budget ~ $150k
Requested deferral = $50 x 12 mos = $600 = 0.4% of annual budget = relatively inconsequential considering your collections history.

Would not try to shorten the requested deferral period.

But I do think that the questions need to be asked again: What happens in year 2? Will HO be able to pay $150 per month?

The nagging questions I have been thinking about are these - Did HO ask for a year because everyone (you included) is looking at things one year at a time? Or did HO ask for a year because of reasonable expectation of full recovery in a year? Or something else?

Your primary goal I'm sure is that HO is successful in repayment. How can you do that if you don't know how much time HO really needs? That's the piece of the puzzle that's missing - and I don't think we can help you with the answer.