I'd like to hear how your HOA collects late assessments

It is common. I do not know that it is all that different from any corporation trying to collect debts owed.

As for the inherent conflict of interests of attorneys making more money by promoting more billable hours: This is present in most or all professions. Professions, including attorneys, have rules of ethical conduct. For attorneys, these rules have the power of statute.

How can one tell when an attorney is not using his or her best judgment? Existential, epistemological, "what if... " questioning is the very nature of the law. I think challenging a lawyer's judgment as unethical is very hard to do.

I happen to think HOA attorneys are taught, with a wink and a grin, that the more dissension they can stir up, the more billable hours they will end up having. The ethical HOA attorneys will not practice this.

why do you waive the attorney fees in the long run? When an attorney fee is incurred and added to a homeowner account, the HOA has to pay the attorney. The $ amount is placed on the Homeowner account so that we can recover that $ from the homeowner when they start paying, or in a judgement if it goes to court. We are often asked by a homeowner to remove the legal fees and we always say no. That is money that has already been paid out of HOA funds, so that basically means you want all your neighbors to pay your legal fees. We will sometimes remove Late Fees, or Interest on a past due balance, but those are not charges that the HOA has to pay while waiting for the homeowner to become current. Assessments are due 12/31, and we give a30 da grace period to 1/31. First "reminder notice goes out in February, 2nd notice in March, third notice in April. Fourth and final notice goes out in May and also tells the homeowner that the next step they will be sent to our Attorneys for further collection efforts in Lune. Lein is usually placed on the property at that point. Once we turn it over to the Attorney's office for collection, we (the HOA Board or Management Company) can have no further dealings with the homeowner. Everything has to go through the attorney. We also offer everyone a payment plan from the start so people can break it into 3-6 month payments, auto drafted from their bank. Delinquent account at the attorney are also offered a payment plan negotiated with the attorney, with much more detail to the stipulations. If you default on a payment plan at the attorney it will cause your account to go back into active collection pursuit. SFH HOA 1057 homes usually 97$ collected by Marc/April.

Another thing: check your CC&Rs. In my state, attorney's fees are considered assessments, and the board has little to no discretion on waiving them (unlike with random fees).

A lazy board turns collections over to an attorney or agency.

Observation/rant du jour:

There seems to be an unspoken assumption that everything related to HOAs is "Mickey Mouse" and should be done on the cheap - not just on this website but everywhere, it's where a lot of that "oh those awful HOAs" stuff comes from. For example:

* HOA debts aren't real.

* There's nothing wrong with stiffing the HOA, it's just "stickin' it to the man" (conveniently ignoring the fact that the homeowner doing the sticking IS the man).

* If you stiff the HOA, you're entitled to slack because NEIGHBORS.

* If the neighbors object, they're lousy human beings.

* If the board does their job, they're even worse human beings (conveniently ignoring the fact that most bylaws state explicitly that collection and foreclosure are among the board's duties).

* If the board fails to do their job, it's their fault when there isn't enough money.

* Lawyers and other vendors should cheerfully charge HOAs less because HOAs don't have enough money to pay for all of the things they need to pay for.

* Money responds to magical thinking. (No. It does not.)

It is the nature of debt that the penalties imposed for failure to pay can far exceed the original amount of debt if non-payment continues beyond the terms outlined in various legal documents which the debtor signed and agreed to.

This should be hammered home to anyone who wants to buy a home or take on any debt, but it isn't. It's one of the reasons that many of us agree that home buyers are badly served by the HOA-Realtor-Developer Industrial Complex. But guess what? It isn't just HOAs. Banks will take your home if you fail to repay your mortgage. The county will take your home if you fail to pay your property taxes. Don't think for one minute there won't be late charges and interest and fees and collection costs piled on top of the debt amount - and that's before any lawyers get involved.

You can argue that lawyers are paid too much, and yes, their fees can be eye-watering. It's why we try to slow down posters who come onto this site all hot to trot to file a lawsuit. But what are your other options? Do without their legal expertise? Not advisable if the HOA expects to remain on the sunny side of fair debt collection laws and to prevail in court if push comes to shove.

Our attorney acts as the association's collection agent, which is stated in their communications with the homeowner. The attorney will also disclose that their fees are being assessed to the homeowner. Our CC&Rs also state this. We make it hard for anyone to claim that they don't know. Whether or not this is "exploitive" is open to debate, given the amount of disclosure required by real estate and fair debt collection laws. I've also mentioned elsewhere that the only two homeowners we've taken action against were ones who chose not to pay but were not experiencing financial hardship. They were 100% the authors of their own misfortunes - and the only reason their homes were livable were because their neighbors were paying their shares of the water, sewer, insurance, and other bills.

If anything, HOAs are much more likely to get stuck with unpaid assessments as well as the attorney fees. My sympathies lie with the rest of the homeowners who faithfully pay their assessments and who either get stuck with the deadbeats' debts or who don't get the services they should be entitled to. If you're still feeling sorry for the deadbeats, a year of two of "attitude" out of them should change your mind - it's almost a rite of passage for newbie board members.

Also boards who know that they're not experts in debt collection and who do not want to jeopardize the HOA's ability to collect the debt.

Debt collection isn't that hard and for HOA, the law tells you all the steps to take.

I think an owner who does not pay her or his assessments is predatory, counter-productive and anti-community.

Huh?

A collections attorney always gets paid by the HOA, unless the HOA stiffs her or him. From experience, collections attorneys working for HOAs do not operate on contingency.

You add that:
This is not what I have seen with the two HOAs where I was paying attention to debt collection.

Here's the deal, from my experience:

Payment plans are good.

Collections agencies stink.

Collections attorneys are good.

Placing a lien, even if it's only paid when the property is sold and so changes title, is great. The downside is when enough HOA owners are either fed up with HOA services, or broke and they know the HOA is not going to foreclose, the HOA may start struggling to pay bills and maintain the property properly.

Pick your poison. I would not blame anyone if they disliked all four options. But I do not think a board is allowed to do nothing.

While a delinquent homeowner resists paying, what is it you think a collections attorney is doing for her billable hours?

You posted that your HOA has around $30k in accounts receivable for attorneys' fees (presumably for collections efforts). Why is it collections is not working?

I am not sure it is the attorney. It might be a board resisting foreclosing on those owners most behind, to make a statement.

In our state you can put a lien on a home after their late account reaches $1000. Our property management company does send letters to homeowners who are late with their fees every month with their account balance. They are charged a $25 late fee, a $10 letter charge (we have to pay that to the PM) and 18% interest. The PM will continue that forever or until we decide it's time to move it on to the collections agency. We do waive everything but the letter charge if they have a good excuse or are just a few days late or if it's a once a year thing.

Once the account gets to $1000 and we've had no response, we send the account to our collections agent. She is great to work with. We used to use our attorney but they charged us way too much. The collections agent does not charge us for the accounts - the homeowner has to pay all the fees. Once the account is with collections, she sends a demand letter and an offer for a payment plan which includes late payments, fines, interest and her fees. This usually works to get them to pay. If there is no response from the homeowner, then we wait the statutory required amount of time and put a lien on the property. The other advantage to the collections agent is she knows all the federal and state collections laws and follows them.

We do use our attorney if a house is in foreclosure with the mortgage company so we can establish our right to proceeds of the sale for the debt they owe us. That's cheap - our attorney billed us $150 in the last couple of months for one of these cases and that will be part of the debt owed anyway.

All of this is outlined in our collections policy and is according to statute.

We are NOT lazy because we use a collections agent. We're not experts in collections law - and the federal government has very strict rules you have to follow. You need an expert if you are going to collect. The alternative is to just keep billing and let the debt grow and risk that you never collect. We've discussed this before - my fiduciary duty is to collect any amounts owed to the association legally. We waive fees when necessary and aren't heartless, but we need to protect the association's right to money that is owed. And with 820 owners, there's no way the board could keep track of it all.

See? Exactly what I said above.

HOA owners don't need to pay their debts because "NNNEEEIIGGGHHBBORRSSS". This is what happens when you confuse personal relationships with business ones. You think people who've chosen not to pay assessments will pay if you ask them nicely? They've already been asked nicely, and they've told you what to do with your nicely. What often does get people to pay is the foreclosure notice.

In what other area are people allowed to take on monetary obligations of their own free will and expect someone else to do the paying? And then get an attitude when the others object to being used as an ATM without their consent? And then portray the others, from whom you've taken money, as the bad guys? Try going into business with some partners, stiff them, and watch what happens. It'll be very instructive. (Hint: lawyers will be involved.)

Yes, collection agencies can be predatory, it's why we have fair debt collection laws. Don't like the setup? Then don't take other people's money. And, in answer to another question above, yes collection agencies often fail to collect. It's why they buy up debt for pennies on the dollar, that's how they make their work profitable - otherwise they'd operate at a loss. Because lots of people have this notion that they should be allowed to take others' money with no recourse. To be blunt, that's called theft. Just because you're in an HOA doesn't mean you're not a thief, "NNNEEEIIGGGHHHBORRSSS" notwithstanding. In some ways it's worse because you're taking from "NNNEEEIIGGGHHBBORRSSS" with whom you allegedly have a relationship. Now I call that real friendly.

Maybe when homeowners don't pay their assessments we should just send 'em to Pistol Pete's Kwik Kash and tell 'em to borrow from ol' Pete. No lawyers involved, but you stiff Pete and you may lose body parts. And we'll tell the roofs to stop leaking because we don't want to hurt some folks' tender feelings. Yeah, that'll work. (I remember a thread from a year or two ago where the poster was frantic to sell her condo but couldn't because the buildings in her community had tarps on the roofs. But hey, no lawyers. Now there's a model we should all aspire to.)

What people don't understand is that if the HOA doesn't collect, essential maintenance will be neglected and property values will fall accordingly. That takes money out of people's pockets just as surely as paying for liens and other collection activities does. But it's invisible, so people can pretend it doesn't happen - or they truly don't understand that it happens, which is more likely given how inept the majority are with money.

/s, but not really

Cathy, in what other area do people take on monetary obligations and expect others to pay? How about HOA directors who pay thousands to attorneys to carry out personal vendettas and attack members who are not violating anything? This has zero benefit to the membership yet the membership has to pay for it.

What do you think the collections attorney is doing for her billable hours?

Here's my guess:
The board does not want to foreclose. Instead they have standing orders for the collections attorney to place a lien and send threatening letter after threatening letter, month after month, saying the HOA has the right to foreclose and will foreclose. Possibly the HOA attorney helps set up and implement a payment plan. The HOA attorney takes phone calls from the delinquent owner and bills the HOA for them.

Upon collection, the owner ends up paying the HOA back for the collections attorney fees.

Owners know the HOA will not foreclose on them. They know the collections attorney is blowing hot air.

I am not convinced the board knows what it is doing.

I think you should raise the issues you raised in this thread with the board. Dealing with the HOA attorney should not be all that different from dealing with any vendor: If problems seem apparent, have a discussion.

Our Assessment is annual but members are allowed to make monthly payments.
Typically, the issue is sent to the attorney around the 6 month mark.

30 days late - notice sent first class mail
60 days late - notice sent first class mail
90 days late - notice sent certified mail
120 days late - notice of hearing before the board to accelerate payments (so the entire year is due) and to turn over to attorney sent certified and first class mail
within 30 days from last notice - board meeting hearing
within 3 days of board meeting - results of meeting sent via first class mail
within a week of board meeting decision - issue sent to attorney

Typically, our board is willing to waive late charges if paid in full at the hearing.

I was going to refrain from participating in this conversation because I spent 5 of my 10 years on the board as treasurer and dealing with delinquencies took up a huge amount of my time. Which is why some of you know why I usually not that sympathetic to delinquent homeowners unless I know their circumstances and I really dislike investor-owners and certain national banks who left us holding the bag.

I know you’re not happy about the attorney fees and frankly, they were part of the reason we switched attorneys. It wasn’t about how much this would cost the homeowners – frankly, they started this mess by not paying or contacting the board or property manager to explain their situation and ask for a payment plan. Don’t want to deal with sky-high legal fees, liens, and all that – pay your assessments like you’re legally obligated to do in full and on time!

Anyway, we liked our last attorney, but it seemed we weren’t getting anywhere with some of our more obnoxious delinquent homeowners who seemed to be a lot smarter about gaming the system than he was. That’s why we picked our current attorney, whose firm was VERY good at debt collection (the attorney was a co-worker of mine and so when he was considered, I abstained from the discussion and final vote).

One of the first things he did and still does is to send us a schedule of legal fees, so we could calculate how much initial legal action would cost, and then we could make decisions on what happened next based on the findings. For example, his initial research might reveal the homeowner had a ton of legal proceedings against him, so the best thing to do would be to file a lien, otherwise we’d have to get in line with everyone else (who weren’t getting paid either). Or if bankruptcy had been filed, it might be enough to file a proof of claim with the court and track its progress - he'd go to court on our behalf if necessary.

Sometimes, the attorney’s first letter to the homeowner was enough to convince him/her the association wasn’t going away, so a payment plan would be requested. The attorney would suggest the terms and a recommendation as to what the board should do – we might accept, reject or switch up the terms. If the homeowner complied with everything without lawsuits and liens, great.

You know or should know that attorneys charge for EVERYTHING (you are paying for the time and expertise, after all), so if you don’t have a schedule of legal fees, it's past time your board got one. In fact, get one every year, so you’ll know if and when some fees have increased. You also know that court costs aren’t determined by the attorney so if they go up, that’s what you’ll have to pay.

Our attorney’s firm has a client portal on the website, so we can log in and see where our cases are – that saves money in phone calls, emails, and faxes from the board, so if yours has one, use it. Designate ONE person to speak to the attorney, so you don’t get 5 people asking 5 different questions and the association is charged for all of them.

There’s nothing wrong with evaluating your attorney’s performance every year – some things will happen that you can’t control, but you want to see progress in the collections. You may need to change up some things to make the legal costs more efficient – and you may end up doing as we did and looking for another attorney. Some attorneys are better than others, so do your due diligence by asking for references and checking them, along with their experience in working with HOAs. Good attorneys will also help you evaluate your collection policy – part of your association’s problem may be that it may not be clear on certain things. Perhaps you should enact a policy to accelerate all unpaid assessments for the year if the account is turned over.

Most of all, make sure your homeowners get a copy of the collection policy every year, so they know exactly what will happen (aka fuck around, find out). I but remember, you’re paying for their time and expertise – and you see that attorneys charge for EVERYTHING. I don’t know our current legal costs, but our collection policy states that homeowners will have to pay the association’s expenses incurred in collecting the debt. That includes late fees, the collection cost the management company charges to monitor the account and send preliminary nastygrams before it goes to the attorney (after 60 days), attorneys fees, returned check fees, if warranted, etc.

Before I stepped down, I was also newsletter editor, and once we published an article where we showed how quickly the cost could add up, starting with us accelerating delinquent accounts (when it gets turned over to the attorney all unpaid assessments for the year immediately become due and payable). If you looked at the breakdown of a typical delinquent account, you could see it didn’t take long for the homeowner to face a bill of $2K or more. That’s why we always stressed the homeowners let us know immediately if they were having financial hardship like major medical illnesses, job loss, etc. because a slow nickel is better than a fast dime and so we were willing to negotiate payment plans to get the account current and they wouldn’t fall further behind.

People are adults and should know how to wipe their behind – meaning if you get into trouble or make a mess, clean it up. You know you’re legally responsible for paying assessments as a member of the association. I also know financial circumstances can and do change, but ensuing problems won’t disappear until they’re faced.

Our state has super-liens for the first six months of delinquency that take priority over everything, including the mortgage. Super-liens include attorney and collection costs.

The manager reaches out to delinquent owners each month, and unpaid bills are charged late fees every month. A couple times we had the lawyer draft a demand letter. It's a form letter and they charge about $100. There hasn't been a need to proceed beyond this point.

Collection agency after X number of days

Very true.

I had one owner who would wait until the court case to foreclose started before they would pay.
Then we would go through the same thing the following year.

I never understood why. It cost them more in the long run and the Association - over a five year period - lost money (due to legal fees that could not be charged to the owner).
I suspect this is still happening today.