prepaid assessments

Hi all. Our HOA does quarterly assessments. We have always pre-paid them for the year. Can these pre-paid assessments payments be used for other things, such as fines? The payments specifically state for assessment fees only.

yes

Just on a practical note, how or why does one pre-pay a fine?

I have visions of a homeowner telling the board that they plan to violate Article IV of the CC&Rs and here's the money for the fine, don't bother with the violation notices and hearings... :-)

Of course this doesn't work, due process is usually required to make the fine lawful.

Do you have a written policy on how payments will be applied.
If not, then follow the memo line and apply it to assessments.

Then start working on adopting a written policy on payments.

The problem is, our HOA is applying the pre-paid Assessments to fines, then charging late fees for an unpaid assessment. The fines are being disputed, but there is an HOA person who has singled out the 2 properties that we have, and are constantly making up stuff. And if the fine was already "paid" the board wont discuss it. We were told by the vice president and one of the accounting people to write for assessment only on the check and that it would be used only for that purpose. But the other people in accounting will now reject our assessment payment because I have written 'ASSESSMENT ONLY" on it. This has been going on for a year. There cannot be late fees and collection fees on something we paid ahead of time. I have searched through the CC&Rs and tried to find some law that states that payments should only be put toward the intended purpose. I am a bookkeeper in an unrelated field, and when our customers send in payments they send in remittance, and that is where the payment is applied, regardless if they have other unpaid invoices. I am in Arizona, does anyone know if there is anything I can do about this problem?

That sounds crazy Suzan, I don't even know if that would pass the smell test here in Nevada. In the age of paying assessments online there is no way of writing for assessments only on the check.
Your governing documents would provide more insight as to how your assessment account is divested. Is your HOA self managed or have a PMC?

SusanA9

The shenanigans you described are precisely the reason the State of Texas in 2011 mandated the order in which payments received are to be applied to amounts owed the association, although the mandate applies to Texas Property Code Section 209 HOAs only.

I'm with Max on this one.

In California

I have it all in emails from the HOA. The HOA is Brown Management for Summer Lane. I have the actual emails from one of the accounting ladies there who told me this:
Good Afternoon,

When the admin of the community processes violations and applies a fine to your account, we don’t go in and post any prepaid funds to your fines. If you have a prepaid balance on your account, those funds will automatically apply to your fines. All we can do is go into your account if we are notified by the homeowner (you) that a prepaid/credit balance was applied to fines and manually adjust said balance. You
can also use the memo line on your check and put "For Assessment Use Only"

I will take care of this as soon as possible and the fine will be on the account as unpaid.

Her signature listed her as AR Specialist from the management company.

When our prepaid assessments kept getting applied to unresolved disputed fines, and then we were getting billed for late assessments (late fees and collection fees), I would send emails about it to the management company, and addressed the Board. I finally got a phone call from a man who claimed to be the VP and told me that the issue was resolved and assessment payments would not be applied to fines. However, the accounting person (other than the one above) who handles our community, refuses to honor what we have been told. The last assessment payment we sent in (no longer will we pre-pay), it was sent in with the remittance coupon for the assessment and the payment said "for assessment only", that payment was returned to us, and said we are not allowed to write on the memo of OUR payment, what we were paying for, then charged late fees and collection fees.
I have asked them to provide me with the policy that says they can use our assessment funds for things other than assessments, and I never get a response.

Does your association have a priority of payments listed in your rules or fining policy or schedules of fines? Does YOUR Board of Director know the answer of would they have to rely on the management company?

FYI, Priority of Payments for California are: 1) assessments owed, 2) fees and cost of collection, 3) attorney fees, 4) late charges, 5) interest. No fines, has to be a separate payment.

have you heard back from them?

I won't heard back from them until sometime tomorrow. They're not the fastest kids on the block in responding.

I think this is your main problem. Why, and under what rule, will they not discuss a challenge to a fine?

I looked at this too. And I think one of the issues is that the assessments were prepaid when the fine hit the account. The OP had a positive balance sitting on her account, not used yet for assessments. Then the fine hit the account and they applied the positive balance, since it was just a bucket of money sitting there waiting to be used for the assessments. I can see both sides of this argument. The software wasn't smart enough to figure out that the money in the account was only supposed to be used for assessments. The OP didn't intend for the money to be used for the fine.

Here's a similar issue - we fined a homeowner $500 for a continuing landscape violation. He uses the "click pay" feature from our management company and has his monthly assessment auto debited from his checking account. He didn't realize that when he authorized the auto debit he authorized it for any outstanding balance. So the $500 fine hit his account at the same time as his monthly auto debit and was paid. He says paid without his consent - but actually it was paid with the consent he signed when he signed up for the program.

Guess you didn't have time.

That sounds like the creative accounting some HOA's use to enforce fines. I don't personally agree with it but it's not illegal.

Everything that I read seems to only be directed toward UNpaid assessment fees.
I paid the assessment fees. I even pre-paid them for the whole year. Then when they cant seem to correctly apply the payment to the correct bill, we now just pay quarterly, and they STILL cannot get it right.
The problem is this: We PAID the assessments. THEY used the money for things other than assessments, then charged us late fees and collection fees and said we didnt pay the assessment. I can easily prove that the assessment WAS paid because I write "For ASSESSMENT ONLY" on the check along with the account number and the quarter in which I paid.
Now the latest game they are playing is, they didnt accept the payment and sent it back to us, said we could not tell them how to use OUR money, and couldnt tell them which bill we were paying. AND again charged us late fees and collection fees after they rejected the payment.

Based on Lorie's findings,

You might try sending the check back with the memo line stating submitted in accordance with AZ 33-1807.

Additionally, you might want to write the board and simply ask the question why the board isn't complying with that section and see what their response is.

Update on this situation.
I sent in our July payment and wrote on the check that I was paying for assessment fees per the Arizona revised Statutes, and included a sheet of paper with the statue typed out, for their easy reference. And the check was accepted and not returned. Thanks for the idea and for the help with this!

Glad it worked out, but I'd still attend the next board meeting and ask them to clarify their policy. Since it would appear your state law doesn't allow them to do what they did, someone needs to talk to the property manager and ensure their procedures are in compliance with state law. Depending on how large your community is, I might consider sending everyone a letter summarizing your experience and suggesting everyone check their account statements. You might not be the only person this happened to and your neighbors might appreciate a heads up.

I wonder why.

I was on a sale call with a new software vendor and they mentioned that Arizona and Nevada cannot apply payments to fines unless the homeowner specifically states that intention. That is the law also in California.

My CC&Rs spell out the order of applying payments, and monthly assessments come *last* (after fines, late fees, collection costs and legal costs). The state treats fines as assessments, though, so legally there is no difference.

I think your core issue is you do not want to pay fines. Have you inquired with the property manager if the Board would be willing to waive the fines, and if so, what actions you can take for them to do so?

Fines are not considered revenue sources and many HOAs will waive them once the violation has been corrected. I would see what options are available for having the fines waived, and then you don't need to worry about whether your check is being paid toward fines or dues.

Susan,

I hope you have written documentation of everything you posted.

At this point in time, I suggest you take everything to an attorney and see what legal options you have (as it's apparent your board doesn't want to listen).