"No cost" vs "cost" Collections

Don it should all be no cost all costs of collection should be passed on to the collectee. We used to front the money to the collections attorney and recover it later. We changed to an attorney who specializes in collections and he adds all his fees and charges to what the member pays and we only receive the amounts in arrears.

I think that is the method that is being considered here. Like I said, I'm not familiar with the pros and cons of each. I like the sounds of the "no-cost". But wasn't sure what would be the best for the community. I don't like how much we are spending on collections, but and hesitant to agree to a switch without more data.

The member is probably trying to reduce the costs the Association has to pay to pursue the delinquency, which is why your policy should state that the homeowner is responsible for reimbursing those costs as well as the delinquent assessments.

I've seen ads from various collection agencies who talk about doing the work at no cost for the association (the homeowner would have to pay them), but it may take a very long time for them to collect and in the meantime the Association has bills to pay. If you're thinking of going that route, best to get one who either specializes in HOA collections or has a lot of experience with it (and if course, you'll have to check their references).

From what I've seen one advantage to using a collection agency is that they can report the delinquency to one or all of the Big Three credit reporting agencies - when that shows up on the homeowner's credit report, it could affect his/her ability to get new credit and a job in a few cases. That may have more of an immediate impact than a lawsuit which could take years to collect on (if at all, but you might want to do it anyway because the lawsuit will eventually land on the report). It's not a sure thing, so do your homework.

In the end, the Association will have to spend some money on this, specially if the collection agency's efforts fail and you have to turn the account over to an attorney , but you can get that back from the homeowner, so be sure he or she asks for court costs and attorneys fees as part of any lawsuit. You may be able to reduce some costs by finding out what it costs to place a lien against the house and make sure whoever prepares the paperwork knows what he/she is doing. If the homeowner declares bankruptcy, you'll need to file a proof of claim with the court and once again, whoever fills out the paperwork needs to be mindful of the requirements and deadlines.

I can't see any reason to pay a collections agency or to sell delinquent HOA accounts to a collection agency when states have collections laws that generally hold account holder liable for reimbursing the HOA's legal costs directly related to dues non-payment.

While there may be an up-front expense with hiring a collections attorney, the HOA will be reimbursed later with the collection proceeds. The HOA board should try to cut corners on legal fees/costs for actions directly sparked by an account-holder's payment default.

Or am I missing something?

We pay the legal fees for the collections as they occur. However, those "costs of collection" are added to the amount owed by the member.

If those were our numbers, we would pay attorney $540 (attorney fee plus lien fee). We would charge these fees to the HOs account.

Then when attorney receives payment and releases the lien, he would keep the $40 for the lien release, and send the other $1,645 to us.

The law firm we use for our HOA also has an active dues collection division which we use.

Basically it is a multi step collection process and they charge the past due owner their fees plus what the association is owed. Recent case. We were owed $600.00 but the attorney fees were $485 so the person had to pay $1,085 to have the lien removed. The association received $600.

I agree that is the way it should work but I have heard of collection agencies taking their fees up front as I described.