Payment plans

I was wondering how many of you use “payment plans” to help homeowners get caught up on past due assessments?

We have used them with mixed out comes. Most of the time a HO will contact a board member or mc only after a lien has been filed, or a notice of Foreclosure has been sent. At this point, it is our policy to have them submit their “plan” to the Attorney. The Attorney then sends it on to me (as president) along with a statement of the total amount owed including any legal fees.

The board (mostly through emails) will discuss the plan, considering many things.
Such as the length of term of the plan, is this a habitual “offender” ECT. We have yet to reject a “plan”, however we have asked that some adjustments be made i.e. shorter term.

Whenever a “plan” is approved, we include that any assessments that come due during the plan term must also be paid on time. It is our policy to stop late fees from the time the plan is approved, provided they meet all of their obligations. If they default on their plan we add back all of the waved late fees. This is all explained to the HO when the Attorney sends the notice of approval. If they default on their plan, they are sent a 15-day demand notice, if there is no response the account will proceed with the next step in the collection process. Only once have we reinstated a plan that the HO defaulted on. In that case, both Husband & wife lost their jobs within 2 weeks of each other. After having a meeting with them, the board gave them a 60-day waver. Once again, the official notice went through the Attorney.

We have also accepted a couple of “plans” before the account reached the Attorney. In all those cases, the board made it very clear that if they did not hold up their end of the deal, the account would be forwarded to the Attorney for collection.

We have told our homeowners in our Newsletter, at meetings and one on one, if they have a problem paying their assessments, Talk To Us. We cannot help you if you do not let us know what is happening. Unless a board member knows a homeowner very well & is comfortable asking, we as a board never approach a homeowner on the matter of overdue assessments.

Sorry, this got so long. I was hoping to get some input on how we do this and maybe how some of you handle collections.

Mike

Hi Mike:

At the company I used to work for, they offered payment plans prior to filing a lien. Once a lien was filed, the account was sent to the lawyer, they had the opportunity to set up a payment plan, and if they didn't, then the lawyer went to court for a judgement against the owner. We rarely, if ever, went to foreclosure, keeping that as a "last resort" tool.

My belief is that if they are behind, offer them the opportunity to set up a payment plan prior to filing a lien. Normally, I wouldn't recommend a payment plan that lasts more than a year. If they don't keep up their end of the bargain, file the lien and send to collections.

I know there are states where the law doesn't allow late charges, interest, legal fees, fines, etc. to be liened. We, in Oregon, are more enlightened, as these are allowed. However, most of the HOA lawyers in Oregon are very reluctant to foreclose, as there are other options available in most circumstances to collect. There are enough horror stories about homes that are foreclosed upon due to small amounts due; we don't want to add to the stories.

J. Patrick Moore, CMCA

We agreed that the HOA would send out notices and consider liens at 6 months of dues owed. (We pay monthly). The dues were $50 plus $20 late fees. It costs about $300 to file a lien in my state. It just makes sense to wait until the money reaches the same costs as the lien filing to us. Why spend more money than we would take in? Plus the lien included paying back the cost of filing a lien/legal costs. If we did lien, we could "break-even".
I insituted a payment plan for the people that made the most sense. Everyone has a reason why they can't make a payment that month. Alot of them understandable. (Health, death in family, simply forgot, new person, etc...) The plan involved allowing the person to DOUBLE their dues payment for the next month until the amount was paid off. Say they didn't pay for 3 months. I'd ask them to pay $100 the next month. This way, they could keep up to date with that month's dues plus pay on the previous month's. Eventually catching up and paying off. I was willing to wave the "late fees" if they stuck to the plan. This worked for many people who were willing to ask.
Payment plans are good if they are consistent and fair. It's got to be a policy everyone agrees to. It's hard to do considering each person has different circumstances. All in all, the best way is doing whatever you can to avoid liens/foreclosures. Those cost the HOA money and don't guarantee the money for long periods of time.