Late Assessment Payment Process

DavidG45 (Delaware)
Posts: 994

Posted:

I have recently been placed on a newly formed Finance Committee for our HOA, which just recently was turned over from the Developer to the Owners. Some time ago I had already come to the conclusion that our existing Property Manager and Attorney were not interested in actually collecting payments from homeowners who are behind on their monthly assessments. Instead, it looks like a bunch of people are wetting their beaks on our late payers, enriching themselves while the HOA receives nothing and the owners just get deeper into debt. When an owner is late, the PMC sends a late notice and dings us $50. When they get further behind a collection company sends a demand letter and dings us $80. When they get further behind the attorney sends another letter and appears to do a credit check, and dings us a couple hundred dollars. If the homeowner asks for a payment plan, or asks to be relieved of all the late fees, the PMC sends it to the attorney - who makes a suggestion to the board, and dings us another couple hundred dollars.

Naturally, the HOA forks over the money then passes it on to the homeowner, who doesn't understand that while they keep making payments their "past due" keeps going up. I finally realized all of these other parties have zero interest in the HOA getting their money - they are raking in cash. Currently we have about $50,000 in AR; about $30,000 of which is one kind of collection fee or another.

So the Finance Committee is going to develop and document a plan that predefines the process. I'm curious to hear if others have tried to come up with strategies that get the most money back from late homeowners while minimizing collection expenses. At the very least, it seems to me the first couple of letters could be sent directly from the Board for the cost of postage. In addition, we have people who haven't paid anything in two or three years. Wouldn't it be simply and cheaper to just pay the attorney to put a lien on their property then just sit back and wait - than to keep paying various companies hundreds of dollars to make various threats and demands?

TIA

MichaelT21 (Arkansas)
Posts: 501

Posted:

David,

Like many assocations, we deal with this a lot. Here's our process:

1) Homeowners have until the 15th of the month when the payment is due (4 times per year) to pay with no penalties. If no payment is received by the 15th of the month, a $35 late charge plus 12% annual interest is added to the account. Of this $35, $25 is kept by the association, and $10 is given to the property management company for their cost in sending out a delinquency notice.

2) Each month thereafter (on the 15th), additional $35 late charges and interest are added to the account. Again, $25 is kept by the association and $10 is given to the property manager.

3) After about 5 months of non paying, we start sending letters. We send three pay-or-else notices per our collections policy, each with stronger language.

4) One of the three pay-or-else letters offers payment plans. No homeowner has taken us up on a payment plan offer when it is extended as part of the pay-or-else letter. More on payment plans later.

5) By the time the homeowner hasn't paid for about 7 months, the account is then discussed at a Board meeting, and if approved, is sent to the attorney for legal collections. All attorney expenses are initially paid by the association but are added to the homeowner account and the homeowner has to pay these costs. Costs really skyrocket once the attorney is involved.

6) After about 2 months of the attorney trying to collect, they let us know that they have not been successful and ask for Board approval to initiate foreclosure proceedings. We discuss at a meeting, vote, and then authorize the foreclosure proceeding to continue. Again, all attorney costs in foreclosure proceedings are added to homeowner account so homeowner has to pay all expenses relating to this.

7) Every homeowner has eventually paid prior to a sheriff's sale, but the costs are huge - upwards of $10,000. Must be a painful check to write.

About payment plans:

We have extended payment plans to about 4 or 5 homeowners in the past. Every payment plan has been successful in that it returns all assessments back. Our property manager doesn't monitor the payment plans, so someone from the Board has to check and make sure that payments are being made on time. Inititally I wasn't a big fan of payment plans but I have softened in that approach. It allows homeowners to get caught up without having to pay exhorbant attorney fees, which is nice. We used to waive late fees and interest but have stopped doing that because we like the revenue.

I hope that helps. Please let me know if you have more questions.

BillH10 (Texas)
Posts: 1,217

Posted:

In Texas, Property Code Section 209 HOAs are required to have a very definitive past due account collections process which includes:

1. Some number of association or (generally) MC generated nice late, late, sternly late letters saying one is past due with dates by which payments may/must be made. Late payment charges and past due interest may be applied, as may all costs of collection. The property code requires a payment plan be offered on day one.

2. An application of payments policy which means payments received go first to the most past due monthly assessment amount, the next most past due monthly assessment amount, etc. Once the past due assessments are cleared up, subsequent payments are applied to other past due amounts (attorney fees, late payment charges, etc.) is a specific order.

3. After the second or third letter above, the matter is generally referred to the attorney, who does not send nice letters and gets into the nitty gritty of liens and foreclosures.

4. Some associations may use collection agencies, we never have nor have any of our clients.

5. All of the foregoing is billed to the past due owner, in some cases the soft costs (late payment charges and past due interest) may be waived, especially if payments are not normally late and the dog ate the check or something.

Look at the Texas Property Code Sections 209.0062/0063/0064

DavidG45 (Delaware)
Posts: 994

Posted:

Quote:

Posted By MichaelT21 on 07/20/2022 7:23 AM
David,

Like many assocations, we deal with this a lot. Here's our process:

1) Homeowners have until the 15th of the month when the payment is due (4 times per year) to pay with no penalties. If no payment is received by the 15th of the month, a $35 late charge plus 12% annual interest is added to the account. Of this $35, $25 is kept by the association, and $10 is given to the property management company for their cost in sending out a delinquency notice.

2) Each month thereafter (on the 15th), additional $35 late charges and interest are added to the account. Again, $25 is kept by the association and $10 is given to the property manager.

3) After about 5 months of non paying, we start sending letters. We send three pay-or-else notices per our collections policy, each with stronger language.

4) One of the three pay-or-else letters offers payment plans. No homeowner has taken us up on a payment plan offer when it is extended as part of the pay-or-else letter. More on payment plans later.

5) By the time the homeowner hasn't paid for about 7 months, the account is then discussed at a Board meeting, and if approved, is sent to the attorney for legal collections. All attorney expenses are initially paid by the association but are added to the homeowner account and the homeowner has to pay these costs. Costs really skyrocket once the attorney is involved.

6) After about 2 months of the attorney trying to collect, they let us know that they have not been successful and ask for Board approval to initiate foreclosure proceedings. We discuss at a meeting, vote, and then authorize the foreclosure proceeding to continue. Again, all attorney costs in foreclosure proceedings are added to homeowner account so homeowner has to pay all expenses relating to this.

7) Every homeowner has eventually paid prior to a sheriff's sale, but the costs are huge - upwards of $10,000. Must be a painful check to write.

About payment plans:

We have extended payment plans to about 4 or 5 homeowners in the past. Every payment plan has been successful in that it returns all assessments back. Our property manager doesn't monitor the payment plans, so someone from the Board has to check and make sure that payments are being made on time. Inititally I wasn't a big fan of payment plans but I have softened in that approach. It allows homeowners to get caught up without having to pay exhorbant attorney fees, which is nice. We used to waive late fees and interest but have stopped doing that because we like the revenue.

I hope that helps. Please let me know if you have more questions.

I'm a little confused about the first five months. You say the PMC sends a delinquent notice, for which they are reimbursed $10. However, you say that after five months you start sending letters. Is the delinquent notice sent in each of the first four months sent by mail?

Also, does the HOA pay the $10 each month regardless of whether or not they receive payment? So after four months the HOA has billed the homeowner $100 (plus interest) and paid the PMC $40?

TimB4 (Tennessee)
Posts: 21,061

Posted:

1st missed payment. Letter indicating missed payment and late charge. The letter will often offering to waive late charge if account is brought current by mm/dd/yyyy

2nd. Missed payment. Letter indicating missed payment and late charges.

3rd missed payment. Letter sent via certified mail and first class mail of missed payment and late charges.

4th missed payment. Letter sent via certified mail and first class mail of boards intent to send issue to court for lien and potential foreclosure. Member is invited to attend meeting and/or bring the account current. Additionally, the member is reminded that they will pay the costs of collection.

5th missed payment - issue sent to attorney for collections action, lien and start of foreclosure proceedings.

Note: we have on owner who consistently makes us go through all of these steps prior to resolving the issue. At best, the Association breaks even. Often we lose some money (as not all legal costs can be passed on). I've encouraged foreclosure but once the board discovers that it's their neighbor, they never go through with it.

When I first took over as Treasurer, we had two accounts that were very delinquent. With the boards permission, I offered to waive all late charges if they would bring their account current and pay the current year in full. Both took that offer.

We also advertise in our newsletter how the member can utilize their banks bill pay system so the payment is automatically sent. This helped lower delinquencies except for the first of the year when the assessment would change but the members failed to update their bill pay amount with the bank.

MichaelT21 (Arkansas)
Posts: 501

Posted:

Quote:

Posted By DavidG45 on 07/20/2022 8:35 AM

Posted By MichaelT21 on 07/20/2022 7:23 AM
David,

Like many assocations, we deal with this a lot. Here's our process:

1) Homeowners have until the 15th of the month when the payment is due (4 times per year) to pay with no penalties. If no payment is received by the 15th of the month, a $35 late charge plus 12% annual interest is added to the account. Of this $35, $25 is kept by the association, and $10 is given to the property management company for their cost in sending out a delinquency notice.

2) Each month thereafter (on the 15th), additional $35 late charges and interest are added to the account. Again, $25 is kept by the association and $10 is given to the property manager.

3) After about 5 months of non paying, we start sending letters. We send three pay-or-else notices per our collections policy, each with stronger language.

4) One of the three pay-or-else letters offers payment plans. No homeowner has taken us up on a payment plan offer when it is extended as part of the pay-or-else letter. More on payment plans later.

5) By the time the homeowner hasn't paid for about 7 months, the account is then discussed at a Board meeting, and if approved, is sent to the attorney for legal collections. All attorney expenses are initially paid by the association but are added to the homeowner account and the homeowner has to pay these costs. Costs really skyrocket once the attorney is involved.

6) After about 2 months of the attorney trying to collect, they let us know that they have not been successful and ask for Board approval to initiate foreclosure proceedings. We discuss at a meeting, vote, and then authorize the foreclosure proceeding to continue. Again, all attorney costs in foreclosure proceedings are added to homeowner account so homeowner has to pay all expenses relating to this.

7) Every homeowner has eventually paid prior to a sheriff's sale, but the costs are huge - upwards of $10,000. Must be a painful check to write.

About payment plans:

We have extended payment plans to about 4 or 5 homeowners in the past. Every payment plan has been successful in that it returns all assessments back. Our property manager doesn't monitor the payment plans, so someone from the Board has to check and make sure that payments are being made on time. Inititally I wasn't a big fan of payment plans but I have softened in that approach. It allows homeowners to get caught up without having to pay exhorbant attorney fees, which is nice. We used to waive late fees and interest but have stopped doing that because we like the revenue.

I hope that helps. Please let me know if you have more questions.

I'm a little confused about the first five months. You say the PMC sends a delinquent notice, for which they are reimbursed $10. However, you say that after five months you start sending letters. Is the delinquent notice sent in each of the first four months sent by mail?

Also, does the HOA pay the $10 each month regardless of whether or not they receive payment? So after four months the HOA has billed the homeowner $100 (plus interest) and paid the PMC $40?

Sorry for the confusion.

For your first question, our property management company sends out monthly delinquent notices until homeowners pay at a cost to the association of $10 per notice. We pay the PMC regardless of whether we get paid, but these $10 charges are added to the homeowner account so they are eventually paid by the homeowner. When I say we start sending out letters, I mean that we start sending out our pay-or-else letters per our collection policy.

Our deliquency charge to the homeowner is a total of $35 per month. So after four months of non-payment, the HOA has billed the homeowner $140 and paid the property management company $40.

MaxB4
Posts: 3,513

Posted:

And how much are your monthly or quarterly assessments?