Overdue Assessments

First time poster:
I volunteered to be on our board this year.
We are a 105 home community.
Very quiet. No pool or community building.
We do have a common ground with a lake.

We have a handful of owners (4) who are behind on their annual dues.
What seems to be happening is that the board has the Management Company work with an attorney to write letters
to the delinquent owners.
From what I can tell this isn't working.
I say that because some of these accounts are overdue since the owner bought the home.
In some case over 10 years ago.

In one case a lien was placed on the mortgage.
Our dues are relatively low.
And attorney fees are not so low.
So, in some cases it looks like we would never break even on recovering those past dues.

Thought I'd post here for any thoughts or advice.
I'll be happy to add any additional information that is appropriate.

There are lots and lots and LOTS of conversations on this subject and as a former Board treasurer, I find it comes down to the following

1 - you need a strong collection policy. If you don't have one, work with the attorney on drafting it. Every year, send a copy to the homeowners, especially if you make changes from time to time (you should always evaluate the policy to see what needs to be changed, especially if there are changes in the law governing collections in general)

2 - never, never, NEVER let months or years go by before you decide to pursue an overdue account. The longer you delay (like the person who hasn't paid in 10 years), the harder it will be to collect,.

3 - it's never pleasant to take legal action against one's neighbors, but everyone is legally obligated to pay assessments. Not paying one's fair share means everyone else is indirectly subsidizing the deadbeats. That's not fair, so if people holler upon getting a nastygram from an attorney or are served with a lawsuit, let them. It'll show you're serious and if they don't want that drama, they will pay their bill in full and on time.

4 - there's nothing wrong with sending letters at first. sometimes people do forget or something goes on in their lives and this gets overlooked. However, after two or three, it's time to pull the trigger and let the attorney do what he/she does.

5. Speaking of attorneys, it's OK to have a sit down about his/her fees and other legal costs the association will have to pay when pursuing delinquencies. Comparing the amount of legal expenses vs. the amount actually collected is a good way to evaluate his/her performance. Your policy should have language stating the homeowner will be responsible for reimbursing the association all costs, in addition to the delinquent fees. And talk to him/her about his/her collection expertise - if there's little or none, you may need to hire a specialist.

6. Hopefully, you'll never have to pursue a foreclosure, but if the money really begins to accumulate, that may be your last resort and it should be the final step if everything else has failed. Even then, think it through very carefully before you proceed. Foreclosures can get very messy, are pretty expensive and often, the best you can hope for is that it drives out the deadbeat and someone else buys the home who will pay. Generally, the new owner won't be responsible for the previous debt.

7. Bankruptcies are another area that can cause confusion. Make sure you understand the difference between chapter 7 and 13, and remember that once the owner declares bankruptcy, all other collections have to stop until the judge sorts everything out. You can, however, file a proof of claim - talk to your attorney for more details.

8. Check your documents to see what privileges, if any, can be suspended until a delinquent account is made current, make that part of your collection policy and use it. In my community, delinquent homeowners can't serve on the board, vote in board elections, or use community amenities, such as the clubhouse (until we got rid of it, delinquent homeowners couldn't use the pool and that extended to their tenants if they were renting out the unit).

9. Speaking of tenants, talk to your attorney about garnishing the rent to pay down the debt. You can do that with wages as well.

10. Payment plans can be useful - a slow nickel is sometimes better than a fast dime, especially if the homeowner had legitimate financial hardships such as job loss or major illness. However, it should be in writing and be very clear on what the homeowner's obligations will be. It shouldn't extend past a year without board approval (and its approval should be final).

There's more I can say, but this should be enough to get you started. Whatever you do, make it clear to the homeowners that the board will be taking this seriously, starting right now. Be fair, but consistent and soon people will get the point. Good luck.

Randy,

The Association needs to make a statement.
Focus on the one home that is 10 years behind but send letters to all.
In those letters state that the Association can not continue to allow members to be behind in assessments as this puts a higher burden on those who do pay. Specify that the Board will be taking legal action and start foreclosure proceedings on accounts that are not brought current.

Then bring actual legal action against the owner who is 10 years behind with the intent to foreclose. This is to either have that person actually pay or to stop the bleeding.

Additionally, as word spreads, this will send a message to all others who are behind that they can lose their home.

Foreclosure is ONLY a "Stop the bleeding" step. It's not a money making action. The court is only entitled to make one "Whole". That means you just get your dues owed, interest, legal fees, and maybe late fees back. Your HOA may be the first in line to "bid" on the home when it goes up for foreclosure. It just does NOT want this property at all. That's another long list of issues...

Some HOA's they don't believe in foreclosure. Which is okay. Make sure you have a lien. That will accumulate over time by the time they sell. Avoid suing. One can sell and never pay back the money.

The one thing I did when becoming president is to establish a policy for placing liens or foreclosing. We lien at 6 months and CONSIDER foreclosure at 1 year. We never foreclose on a house that the bank is foreclosing. We keep the lien up to date instead. The bank always gets paid first. So it wouldn't do anyone any good to foreclose on a bank foreclosure.

So I say it's about time to make a policy and let ALL the owner's know what it is. Give a "forgiveness" period of time for those to make efforts to catch up. After that period, close that door. During the forgiveness period offer allowing to forgive late fees/interest or even avoid adding legal fees. Just as long as they pay up.

Incorrect. A lien is placed upon the deed of a property. A mortgage is an example of a lien. A piece of property could have several liens placed upon it. Liens have a hierarchy as to what gets paid first. This varies by State. However, it is typically based on first come, first served with tax liens being the exception - they are always first.

A buyer can not obtain a clear title until all the liens are satisfied.


Legal action can be many things. In this case, we are talking seeking a judgement from a court of law. A judgement is where the court says party A owes party B x amount of money. With a judgement, one can file a lien and foreclose or seize bank accounts to pay the debt, garnish wages, etc.

A lien simply sits there until (if ever) the property is sold or the lien expires.

Lien laws vary by State. Therefore, check with an attorney to see what specifics there are for your State.


Yes. That is effectively what you are doing when you turn it over to an attorney.
It's also possible to sell the debt for less then what is owed.

However, you need to keep in mind that Assessments are due every month/year until the property is sold.


Bankruptcy is a way out of debt.

However, the individual/s declaring bankruptcy must tell the court what debts are to be included. If they included the amount owed to the Association and the court agreed, then that debt is wiped clean. However, the owner still owes assessments from the date of bankruptcy forward. They just don't pay past assessments or charges.

If a lien existed and the Bankruptcy court ruled the debt discharged, then the lien should have been removed.

Again, laws vary by State.
Seek the advice of an attorney.

Hopefully when the bankruptcy occurred, the Association did obtained legal advice.