Ideas for Deliquency/Collections Protocol

Hi all,

We are needing to update our collections policy. What is everyone doing for theirs?

Our current collections policy.

Step 1. Initial collection letter - notice of late payment and $20 fee
Step 2. Intent to shut off water
Step 3. Notice of water shut off
Step 4. Title search to identify legal owner + threat to file lien - $125 title search fee
Step 5. Lien filed - $170 lien filing fee
Step 6. Forward to attorney for foreclosure with board approval - $49 fee

We learned our local PUC does not allow for utility shut off for nonpayment of assessments (even though it's written in our bylaws), so we need to replace steps 2 & 3.

I know some people do credit bureau filing, but we did not feel comfortable with that between the mistakes our property management makes and the irreversible damages it can do to someone's credit.

Our average delinquency at the end of the month is $23,000 with a monthly budget of $20,000.
The top 4 balances are from owners who have not paid in over a year, the next 3 have not paid in 5-6 months.
Only the top balance is with the attorney. They had filed for bankruptcy but then the case was thrown out, so I think we are thinking of proceeding with foreclosure because their balance is over $4k.

Oops, I meant to say that the lien is filed the end of month 5 of deliquency.

I agree with Melissa: shutting off water is tricky. It may present a health hazard and make the property uninhabitable - it's a far cry from denying the delinquent owner access to amenities such as the clubhouse. If the HOA is considered a utility provider, there may also be laws regulating what they can and can't do. And if the affected homeowner has any kinds of issues that may cause Fair Housing laws to come into play, the board could be setting itself up for a world of hurt.

The OP needs to see a lawyer.

HappyE

Assuming you are a Section 209 HOA, I recommend you retain an attorney who specializes in HOA matters and have him or her design your collection process. There are complexities regarding the offering of a payment plan, what happens if the owner is serving on active duty in the armed forces or is a reservist who has been activated, and the structure of the language which must be used regarding referral to the attorney and filing for a lien.

The costs you quote seem quite low, even before the the attorney is involved the expenses accrue quickly due to the requirement to use certified mail or another positive delivery service, management company time, late charges, and past due interest. I would not be comfortable using an attorney who does not specialize in HOA matters, the average attorney most likely will not be knowledgeable of the process. I don't wish to seem uncaring; the costs of collection are charged back to the delinquent account so there is no reason to attempt to save money by using someone who does not have an HOA specialized practice.

It has been our experience if the "i" s are not dotted and the "t"s not crossed, the judge will require the Association go back to step 1 and repeat the entire process if you attempt to foreclose and he or she is not satisfied you have properly observed the rights of the property owner and the requirements of various codes and laws.