Trying to establish a collections policy

There are a number of examples on the web - try a Goog k e search. However, this shouldn't be a cut and paste job. You need to consider what's going on now and what would work best for your community.

I stepped down from our board years ago, but served as treasurer for five of my 10 years - and it seemed a lot of it involved delinquencies. Here are some things I learned

Be very clear as to when assessments are due, when they're considered late, amount of late fees and returned check charges, etc. It doesn't matter if the assessments are mailed in, direct deposited or automatically deducted. If it's not there by close of business on D date, it's late.

Homeowners need to know when delinquent accounts will be referred to the attorney - at that point, communication needs to Go through the attorney. For example, if the person proposes a payment plan, the attorney can share it with the board, who should decide whether to accept or reject it, or modify it. The board's decision should be final.

If necessary, delinquent accounts should be referred to the attorney 45 - 60 days from the day they first went delinquent. The sooner you start taking stronger action, the better your chances of collecting.

Your policy should state homeowners will be responsible for reimbursing the association all costs incurred in pursuing the debt. That includes late fees, court costs, attorneys fees, costs of filing liens, lawsuits, etc. That can add up quickly.

Apply payments to the oldest delinquent amount and work your way up. Payment plans should also include current assessments (especially if you pay monthly)

Foreclose should be done AFTER everything else has failed. But be careful - if you're at that point, there's a good chance you'll get nothing because he mortgage company usually has dibs if the house is sold,unless there's a tax lien. Talk to your attorney first before doing anything. If the mortgage company is doing the foreclosure, let them and save your money. Hopefully you already have a lien that may help you get some money back.

The board should evaluate the policy every year to see what's working. This included evaluating the attorney. They aren't perfect and legal action is never guaranteed success, but you don't want to throw good money after bad. Sometimes you need two attorneys - one helps with the usual association business and the other specializes in collections. Just make sure attorney #2 has experience - ask for references and check them

If the homeowner declares bankruptcy, file a proof of claim with the court. This will also put You in line to get some money. It may take a while, but sometimes a slow nickel is better than a fast dime.

You will need a bad debt line item in your budget - this is subtracting d from your monthly income, so you'll have an accurate picture of how much money you're working with. I've heard some recommendations that this shouldn't exceed 4% of your income, but your property manager and accountant can give you some suggestions.If

Hope this helps!

This is something you should obtain from your attorney rather than trying to DIY it. THere are state specific legal requirements.

Our collection policy was 6 months behind we lien. 1 year behind we CONSIDERED foreclosure. We did offer payment plans and offer to waive late fees/interest if you made arrangements to catch up. We could not waive collection expenses like filing lien or foreclosure expenditures. That would become part of what you owed.

Keep in mind we collected $50 a month with a $20 late fee. The breaking point for the cost of a lien ($400) was around the 6 month period. Your mileage may vary on how often/much your HOA collects.

Foreclosures are just a "stop the bleeding" process. It's NOT to make money. The HOA does NOT want to own the home. You just want to get the person out who is not paying in order for a new person to move in that pays. Keep in mind some states have "right of redemption" periods. Meaning 0 to 1 year a person can come back to pay up ALL the money they owed to get the house back in that period of time. The house can set vacant for up to a year in some states after the foreclosure. Keep that in mind.

There are more details involved. This is just something need to think about when factoring in a policy on collections. It's not clear and easy as one may think...

Mark,

I'm in NC as well. Follow the state law on collections and use collections attorneys instead of collections agencies. It's not difficult and very clean.

Jay that is right on good advice...