What is the most effective way to collect dues owed?

Question about collection of money owed to the HOA.

Our HOA has had mixed success of collecting on HOA revenue when an owner falls behind. Sometimes the owners pay in full, which is nice. Other times they file for bankruptcy and then their house is foreclosed, which means we receive nothing.

However, before the owner files for bankruptcy, we rack up a lot of legal charges that we can't recoup once they file and their house is foreclosed, so it seems a little pointless trying to collect.

What do other associations due about dues collection? What seems to be effective for your HOAs?

You might want to read the last paragraph of a Condo or PUD Rider that homeowners signed when they purchased a home in a HOA and then show that document to a HOA attorney.

Most effective way?

Set up a policy. EXAMPLE: 6 months you lien. 1 year CONSIDER foreclosure. NEVER foreclose on a house the bank is foreclosing on. Your doing the work of the bank. Plus you should have a lien already filed and no longer need to take further actions. A foreclosure is ONLY for "stopping the bleeding". Collecting does not make a profit.

Once you have a policy in place it's no longer a random act of collection. It is known. 6 months if you have not made arrangements to pay something, then you pay on a lien. A lien can stay on for a long time and check on the renewal for your area.

Foreclosure is just getting rid of the non-payer in hopes you get a new payer in next time. Some areas have a period of "right of redemption". Which means it could be 0 to 1 year a person has the right to redeem their foreclosed property back. Meaning most likely no one can touch the property including the new owner till that period ends.

A lawsuit is a bad idea. It does nothing for you much unless someone believes to pay it. Otherwise it holds no one to the ground in paying like a lien does. HOA has no rights to one's social security #. So collecting is a bit more difficult. Person can get up and leave and never pay the judgement.

So set yourselves a policy and make sure it is understood across the entire HOA. Enforce it. Save yourselves some legal fees and expenses chasing debt that is just a hole.

In the middle of page two of the deed of trust you signed, there are a number of check boxes. Two of the boxes are for Condo Rider and PUD Rider. This will indicate your property is in an HOA, either a condo or planned unit development. Depending on the type of community either a condo rider or pud rider will be attached and they are recorded with the county.

Below is the links to the security instrument by state and the riders

https://singlefamily.fanniemae.com/legal-documents/security-instruments

https://singlefamily.fanniemae.com/legal-documents/riders-addenda

John,

Interesting, I'll have to take a look.
However, not all loans are through or sold to Fanniemae

It is just a form that lenders use, whether or not the loan is picked up by FM.

After 10 years on my board, 5 as treasurer, I can't say one specific method works better than the other - it depends on the circumstances of each homeowner. One may be an investor-owner (a group I REALLY don't like after my experiences!), another is an older homeowner whose fixed income isn't keeping up with assessments and other bills anymore, and someone else is simply a deadbeat.

Like you, we had to deal with bankruptcies, and more often than not, we ended up writing off the account. I think the key here is to make sure your attorney files a proof of claim with the court as soon as you find out about the bankruptcy. If the homeowner wants to keep the house, he or she will likely have to go chapter 13 and the court will develop a payment plan. It'll take longer to get your money, but I believe you get interest.

If you negotiate payment plans, make sure the homeowner understands the Board has the final say on whether to accept it, and it has the right to cancel if the homeowner doesn't comply with the terms. Don't drag these out - start with 6 months. One year is the max, but the board can decide if it wants to extend it based on the circumstances and the homeowner's compliance. The homeowner must also keep up with current assessments. If that means sending small payments every week or every other week, so be it.

Insist on written verifiable proof of hardship - to protect privacy, we had our attorney collect that information and do the negotiation on the payment plan for board review and our final approval or not.

At the end of the year, review your collection policy and its effectiveness. If you have to make some tweaks, take a vote and then distribute the updated policy to homeowners (our effective date is January 1). We also talk to the attorney about his/her performance - it's true some things are out of the attorney's control (like the courts), but in general, we want to be sure we're getting the biggest bang for our legal buck. That's why it helps to have your attorney's fee schedule, so you'll know exactly what it'll cost to get lawsuits, liens, nastygrams, etc., sent out.

Most important, start your procedures as soon as possible - most of the time, we sent ours to the attorney after 60 days, but there were a few whose payment history was so bad we sent them after 45 days (the homeowner received a letter explaining exactly why this was being done).