Installment plans for assessments in arrears?

Started by GaryP3 • 24 replies • 1015 views

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GaryP3 (North Carolina)
Posts: 16

Posted:

I'm a member of the board of an HOA in North Carolina.
We have decided to allow Installment payments for some folks that have been late with their assessments.
We have tacked on interest to the amount owed which according to the North Carolina General Statute 47F (NC Planned community Act) can be a max of 18% per year.
Another section which deals with allowing Installment Plans says that "a reasonable handling fee" can also be collected. My read is that the handling fee is allowed in addition to the interest but others on the board think that the handling fee has to be included in the total of 18%.
Before getting advise for the lawyers I thought maybe folks here can speak from similar experiences in their communities.
Thoughts?

Thanks,
Gary

MelissaP1 (Alabama)
Posts: 13,836

Posted:

If your encouraging people to pay up, charging extra isn't the way to go about it. Our HOA we had a policy of 6 months behind we lien, 1 year we CONSIDER foreclosure. This way we could give those who fell on hard times a chance to work out a payment plan. We also forgave the interest and late fees on amounts owed IF they would catch up to pay what is owed prior to lien. After we placed a lien, then we had to add not only late fees, interest, but legal filing fees.

This allowed people to catch up or face additional expenses. Late fees and interest can be negotiation points for getting people to pay up. Court can only make one whole. Late fees and interest are more punitive actions. So Back dues and legal expenses expended to collect are usually recoverable.

Former HOA President

GaryP3 (North Carolina)
Posts: 16

Posted:

Quote:

Posted By MelissaP1 on 11/13/2018 6:07 PM
If your encouraging people to pay up, charging extra isn't the way to go about it. Our HOA we had a policy of 6 months behind we lien, 1 year we CONSIDER foreclosure. This way we could give those who fell on hard times a chance to work out a payment plan. We also forgave the interest and late fees on amounts owed IF they would catch up to pay what is owed prior to lien. After we placed a lien, then we had to add not only late fees, interest, but legal filing fees.

This allowed people to catch up or face additional expenses. Late fees and interest can be negotiation points for getting people to pay up. Court can only make one whole. Late fees and interest are more punitive actions. So Back dues and legal expenses expended to collect are usually recoverable.

Thanks for the reply. I see your point. We have a difficult time getting responses from many of those who are in arrears. Installments aren't offered some we have contacted and who have claimed to have financial difficulty. They all agreed that they owed the fee plus interest as stated in the Covenants. We are now crafting the Installment Plan agreement and there will be additional work in tracking and bookkeeping involved in that and we determined that 5% per year was reasonable. We don't (not can we afford) a MC and we are not trying to profit from hardship. The question was more about the interpretation of the General Statute.
The HoA is a business after all and the board is charged with maintaining and enforcing the covenants as well as rules and regulation. We have a fiduciary responsibility to member of the HOA to collect assessments so that we can keep it going. Of course we are compassionate and will listen to reasoning given but I think there are rules to be followed and most of the time there is a cost to breaking those rules.

GaryP3 (North Carolina)
Posts: 16

Posted:

Quote:

Thanks for the reply. I see your point. We have a difficult time getting responses from many of those who are in arrears. Installments aren't offered all those we have contacted and who have claimed to have financial difficulty. They all agreed that they owed the fee plus interest as stated in the Covenants. We are now crafting the Installment Plan agreement and there will be additional work in tracking and bookkeeping involved in that and we determined that 5% per year was reasonable. We don't (not can we afford) a MC and we are not trying to profit from hardship. The question was more about the interpretation of the General Statute.
The HoA is a business after all and the board is charged with maintaining and enforcing the covenants as well as rules and regulation. We have a fiduciary responsibility to member of the HOA to collect assessments so that we can keep it going. Of course we are compassionate and will listen to reasoning given but I think there are rules to be followed and most of the time there is a cost to breaking those rules.

GeorgeS21 (Florida)
Posts: 3,808

Posted:

I believe installment plans are a slippery slope.

I would enforce per the CCRs... if some are in arrears, and if your docs allow it, then add the interest onto the unpaid dues ... lien the property per your process.

LetA (Nevada)
Posts: 2,679

Posted:

Quote:

Posted By GaryP3 on 11/13/2018 5:15 PM
I'm a member of the board of an HOA in North Carolina.
We have decided to allow Installment payments for some folks that have been late with their assessments.
We have tacked on interest to the amount owed which according to the North Carolina General Statute 47F (NC Planned community Act) can be a max of 18% per year.
Another section which deals with allowing Installment Plans says that "a reasonable handling fee" can also be collected. My read is that the handling fee is allowed in addition to the interest but others on the board think that the handling fee has to be included in the total of 18%.
Before getting advise for the lawyers I thought maybe folks here can speak from similar experiences in their communities.
Thoughts?

Thanks,
Gary

Why are you penalizing your homeowners for paying their assessments on time? Don't play the garbage tacking on an extra fee for people that pay monthly, it is not right and you would not like that done to you.

SheliaH (Indiana)
Posts: 6,964

Posted:

Our policy starts with a late fee being assessed after the due date. If the assessment remains unpaid after 60 days, it's forwarded to our attorneys for collection and the homeowner has to pay an additional fee to cover the property manager's charges to monitor the account and sending nastygrams - that could be where you can place your handling fee. I think it's easier to work with a set amount and you can work with your property manager to determine what that should be - and you can change it as expenses increase. Just make sure you send your homeowners an annual notice of the collection policy that covers all this stuff.

As for installment plans in general, our board has the first and final say on whether to offer them at all or accept a proposed one. We also accelerate the amount owed - if you're 60 days behind and the account goes to the attorney, you will also owe all fees for the remainder of the year.

Our agreements are in writing and depending on how much is owed, the homeowner has 6 months to pay it - after 6 months, the board can choose to extend the plan, depending on how compliant the homeowner has been.
If any part of the plan is violated by the homeowner, it will be immediately canceled and the attorney can do whatever's necessary to collect the unpaid amount (that's usually when the lawsuits and liens come in).

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

GaryP3 (North Carolina)
Posts: 16

Posted:

Quote:

Posted By SheliaH on 11/14/2018 11:01 AM
Our policy starts with a late fee being assessed after the due date. If the assessment remains unpaid after 60 days, it's forwarded to our attorneys for collection and the homeowner has to pay an additional fee to cover the property manager's charges to monitor the account and sending nastygrams - that could be where you can place your handling fee. I think it's easier to work with a set amount and you can work with your property manager to determine what that should be - and you can change it as expenses increase. Just make sure you send your homeowners an annual notice of the collection policy that covers all this stuff.

As for installment plans in general, our board has the first and final say on whether to offer them at all or accept a proposed one. We also accelerate the amount owed - if you're 60 days behind and the account goes to the attorney, you will also owe all fees for the remainder of the year.

Our agreements are in writing and depending on how much is owed, the homeowner has 6 months to pay it - after 6 months, the board can choose to extend the plan, depending on how compliant the homeowner has been.
If any part of the plan is violated by the homeowner, it will be immediately canceled and the attorney can do whatever's necessary to collect the unpaid amount (that's usually when the lawsuits and liens come in).

Thanks,
We have a written Installment Plan and it will not be offered to most owners in arrears. We don't have a management company and right now we can't afford to send all 30 delinquent items to attorneys for processing. In the majority of cases our plan also be to start at 6 months to repay the debt (plus late fee penalties) as written in the Covenants that everyone signed at closing.

GaryP3 (North Carolina)
Posts: 16

Posted:

Quote:

Posted By LetA on 11/13/2018 9:17 PM

I don't know where my OP says that because, of course, we don't do that. You call it garbage and we call it a small and reasonable handling fee. We are taking a risk and it is taking more of our volunteers time to keep track of and process these Installments. You may not consider an HOA a business but I have to disagree. Again, we will hear any reasoning given by an owner and we will work with them but most are late and never tried to contact us until they found out that a lien was the next step. I think you may be a little naive on this.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Gary

I am assuming you are self managed but you also allude that you collect and monitor dues payments. My suggestion is you stop this dues collection practice and set up a Lock Box system with a bank. A bank that accepts checks, Echecks, auto withdrawals, and credit cards. Maybe even a local bank with branch offices or a national bank with branch offices. We use a bank with no local offices but they accept all forms of payments. Make it easy for people to make payments and for your BOD to track these payments.

We pay dues monthly and our Lock Box bank send out a payment book for the year and on can pay as above. We get monthly statements form the lock box back, via our MC.

CathyA3 (Ohio)
Posts: 6,299

Posted:

In my experience, the success of a payment plan depends on why the homeowner fell behind in their assessments in the first place. If it was due to one-time events outside of the person's control - such as identity theft or an unexpected death/funeral expenses - then the payment plan works well and the person gets caught up. In the case of someone who is chronically late, that person will likely not stick to the plan for the same reasons that they were late to begin with. The payment plan simply delays the inevitable and may give the HOA board the false sense that they're doing something constructive, when in reality the best option is to bite the bullet and move to liens, collection actions and possible foreclosure.

If a board is considering offering payment plans, I'd recommend that they be optional. That is, the board *may* offer but should not be required to offer payment plans to everyone who is delinquent. (Would need to check with the attorney to see if that's legal or if it falls under the header of selective enforcement.)

RoyalP
Posts: 1,104

Posted:

ditto

RichardP13 (California)
Posts: 3,868

Posted:

Check state statues when discussing payment plans. Some states, California being one, allows the owner to meet with a Board to discuss payment plan options.

BarbaraT1 (Texas)
Posts: 821

Posted:

I'm in favor of reasonable payment plan fees.

First, there is extra work involved in drafting the payment plan and monitoring it every month.

Second, there should be a deterrent element in payment plans. While it's great that delinquent owners want to catch up, the goal is not to have delinquent owners in the first place. If owners can simply decline to pay their dues for several months, and then get on a payment plan with no financial consequence, why should they ever bother to pay on time? Why wouldn't other owners start using this method too?

GaryP3 (North Carolina)
Posts: 16

Posted:

Thanks all for the advice and guidance. I am new to this and hearing all the possibilities here does make for reasoned dialog.
Ciao,
Gary

MarkM19 (Texas)
Posts: 1,459

Posted:

Richard,
When I was on my last board in Ca. we did the meeting with homeowners. All this did was allow them taking up board members time in Executive Session. All they do is give excuses as to why they can't pay. Most will then get in their nice new car and drive away. Priorities and dues are low on some peoples list.

I have told people that if we could pay the HOA bills with excuses we would gladly except theirs next time. Some laughed and some hated me. Oh well my job is to keep the HOA running and that is what the dues are for.

ArtL1 (Florida)
Posts: 140

Posted:

Bottom line is, those who don't pay are subsidized by those that do. Unless everyone is feeling that generous, you need to get everyone paying their share. If that means filing liens and foreclosing, so be it.

MarkM19 (Texas)
Posts: 1,459

Posted:

Amen and Hallelujah

JenniferG11 (Texas)
Posts: 667

Posted:

Quote:

Posted By CathyA3 on 11/16/2018 7:00 AM
In my experience, the success of a payment plan depends on why the homeowner fell behind in their assessments in the first place. If it was due to one-time events outside of the person's control - such as identity theft or an unexpected death/funeral expenses - then the payment plan works well and the person gets caught up. In the case of someone who is chronically late, that person will likely not stick to the plan for the same reasons that they were late to begin with. The payment plan simply delays the inevitable and may give the HOA board the false sense that they're doing something constructive, when in reality the best option is to bite the bullet and move to liens, collection actions and possible foreclosure.

If a board is considering offering payment plans, I'd recommend that they be optional. That is, the board *may* offer but should not be required to offer payment plans to everyone who is delinquent. (Would need to check with the attorney to see if that's legal or if it falls under the header of selective enforcement.)

Our docs state that the BOD *may* but does not have to, waive interest and late fees under 'extraordinary circumstances', and permit a payment plan, usually 6 months, but it can be longer depending. What is extraordinary is up to the BOD. 'I lost my job'. 'I got into an accident' or the examples you named would all be considered, and I agree that people who have a history of good payments with a genuine circumstance usually stick to the plan and it's the right thing to do.

If the person is barely able to handle the payment plan on top of current dues, they would simply never catch up if fees and interest kept accruing and that is a lose/lose compared to the HOA at least recouping every penny of actual dues.

With ours, it's a promissory note and one late or non-payment on the plan forfeits the waiver of interest and fees and the installment plan. So, there is no danger for us in allowing it. The BOD won't get strung along.

JenniferG11 (Texas)
Posts: 667

Posted:

Quote:

Posted By BarbaraT1 on 11/16/2018 10:36 AM
I'm in favor of reasonable payment plan fees.

First, there is extra work involved in drafting the payment plan and monitoring it every month.

Second, there should be a deterrent element in payment plans. While it's great that delinquent owners want to catch up, the goal is not to have delinquent owners in the first place. If owners can simply decline to pay their dues for several months, and then get on a payment plan with no financial consequence, why should they ever bother to pay on time? Why wouldn't other owners start using this method too?

I see your point. But in our case, one isn't going to be granted to the same people over and over. Genuine circumstance people are grateful and make sure to pay it precisely on schedule so as not to lose the waiver of fees and interest. If they don't, it's instantly void and collection procedures commence.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

I would consider each request for a payment plan on it merits. Any plan offered would be restrictive like miss one payment and the plan ends. Legal action to commence.

GaryP3 (North Carolina)
Posts: 16

Posted:

Just for clarity here is teh wording if the Installment plan we are considering - This is North Carolina and subject to North Carolina General Statute 47F (Planned Community Act)
B) Conditions:

1. Payment Amount shall be due, in full, as stated in Item C, Schedule of Payments.
2. Payment shall be by personal check or money order made payable to Paradise Harbor POA
3. Payment shall be mailed to Paradise Harbor POA, P.O. Box 548, Connelly Springs, NC 28612
4. If a payment cannot be made by the Payment Due Date, the payee shall contact the PHPOA at 704-724-1083 before the due date to notify the PHPOA and re-schedule the payment.
5. If a scheduled payment is not received by the Payment Due Date PHPOA will attempt to contact the payee, by the phone or email on file, and attempt to collect the payment owed.
6. If a Payment Due Date is missed and actions stated in Items B) 4. or B) 5. do not result in that monthly payment being made the PHPOA shall consider the payee in breach of this Agreement.
7. If the payee is considered in breach of the Agreement the PHPOA shall immediately act to place a lien on the lot in question for the unpaid balance of the Agreement.
8. The payee will be notified of this action which may lead to eventual Foreclosure proceedings being undertaken to claim this debt
9. The payee bears the sole responsibility for on-time monthly payments of the full Payment Amount as listed in the Schedule of Payments (Item C). A monthly invoice will not be sent to the payee. Item C is the official notice for when all payments in the Agreement Period are due. The payee may call the PHPOA at 704-724-1083 to obtain a copy of the Schedule of Payments.
10. The Agreement in no way relieves the payee of their responsibility to pay future PHPOA Annual Assessments on time and in full.
11. This original Agreement shall be signed and dated by the payee and returned to PHPOA to be signed by a PHPOA Board Member before it is accepted and becomes binding.

GaryP3 (North Carolina)
Posts: 16

Posted:

I hit the submit too quickly and some info got in the message that I don't like but please be considerate...

KellyM3 (North Carolina)
Posts: 2,239

Posted:

Gary,

It would be worth a few hundred dollars to seek legal advice on offering in-house installment payments for delinquent dues.

1. Many times, courts will not allow late fees/interest to be tacked onto actual dues when you go to collect.

2. People can partially pay and thus enter a "grey area" of delinquency or default. It could reset any collections efforts you've undertaken.

It is a very nice gesture of the HOA but, legally, it will be exploited.

RoyalP
Posts: 1,104

Posted:

GaryP3,

You ALREADY have an installment plan:

Monthly Payments of the Annual Assessment

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