Deliquent/Collecting

For many years my former HOA simply placed lines on the homes of members in arrears. The governing documents authorized this; liens were cheap to implement; and the money came back to the HOA when the house was sold. Subsequently a collection agency was tried for awhile. The agency did not seem to be effective, especially since its commission was so high. The latter is common. Then a new Board president took over and insisted on hiring a collections attorney. When a HOA member did not contest the collection effort, this was a more cost effective way to collect past owed assessments. To me the problem arose when a member challenged the interest and penalties that the gov docs imposed, landing the HOA and the member in mediation. The mediator would ask the HOA to give a lot back, and the President (weak at math?) readily caved. (Whereas with the lien approach, the entire past owed assessments, interest and penalties were collected.) I feel like things have gone south very quickly with my former HOA. Two-thirds of the budget went to front yard landscaping services (it is a stand-alone house HOA); and almost all the rest went to the business manager and HOA attorney. Today the budget is in control, and collections are up I suppose (this made people cheer at member meetings). But this new President felt the HOA needed an enormous reserve fund. For what, I do not know, given the limited services the HOA offers per its gov docs. Over just a few years the board siphoned an enormous amount of money from each year's annual budget to build this enormous reserve fund. The result: Less maintenance of the grounds. I think the neighborhood today looks awful. It's hard to believe the HOA is maintaining front lawns. I think it's hard to blame people for not paying their dues. To me this denotes how easy it is for a HOA to spiral into a state where the value of having a HOA in the first place may be questioned.

I think my current HOA (a condo community with shared walls) uses liens and a collections attorney. The owed assessments are just a small fraction of the annual budget. The grounds look fine.

If your HOA is starting to see an impact on its ability to budget due to people not paying, then I think I would continue with the liens but also consider a collections attorney (not an agency) for certain, large-amounts-owed cases.

Joyce

As hard as our association tried to collect some past dues, we were rebuffed. Once we turned the matter over to an attorney our collection rate got much higher. The "weight" of letters from an attorney mentioning foreclosure, credit rating reporting, etc. woke some up that this was serious.

Mel

We did all that (including liens) but until we introduced the lawyer, foreclosure, credit reporting, etc. we were basically ignored. The process must have some "bite" in it.

We don’t use a collection agency – when I was on the board, we hired our current association attorney because it was far more successful at collections. A collection agency may take up to half of what is owed, depending on the contract, so I’d still recommend you work with the association attorney. Some HOAs have one to do all the collections and another for other association business.

I don’t know about the agency you named and I believe the posting rules prohibit using actual names, so if you’re considering using them or anyone else, look for one that’s worked with HOAs before (get references and check them – preferably local ones). The Fair Debt Collections Act (federal law) has rules on what collection agencies can and can’t do – go to the Federal trade commission (FTC) website to see what they are and then check with your local consumer protection agency to see if there have been any complaints against whoever you’re considering and how they were handled. You already know you need to review the contracts carefully before you sign them.

I wouldn’t sign a long term contract at the start – give them a year to see what happens and if it’s not effective, you can always dump them at the end of the term. I’d also reserve the agency for the early stages of the collection process (e.g. sending nastygrams), which would include reporting delinquencies to the big three credit reporting agencies. That may have a more immediate impact (because credit reports are sometimes checked by potential employers) and if the homeowner doesn’t or refuses to work with the agency, the contract could stipulate the account will be referred to the association attorney who can take further and more serious legal action, up to and including foreclosure, if that’s necessary.

In general, I find the key to collections is to have a clear collection policy and that all homeowners know what it is, and then apply it quickly and consistently - that's why we always send out a copy with the upcoming year's Association budget. Your board also has to be willing to drop the hammer when necessary and if your current one isn't doing it or doesn't have the stomach for it, the rest of the homeowners need to make some changes before everyone suffers with reduced maintenance and property values. As board treasurer, I was always willing to work with people who’d lost their job or had major medical expenses or something else they couldn’t control, but as you state, not paying isn’t fair to everyone else who does. People have to understand that when you don’t pay your bill, bad stuff can and will happen and the association is simply doing what any other business would do. If you don’t want to deal with lawyers, liens and having to pay two or three times what you owe due to interest, late fees, and the rest, pay your fair share in full and on time.

Joyce,

Please review the sites Posting Rules

Caught it after I asked. Thanks