Q: Allowing Monthly Payments for Dues?

Good question, Cathy.

You have several options, as you noted, but I would in no way ever allow a monthly payment plan that extended past the due date to NOT include any late payments required by the CC&Rs. And, to be honest, the ONLY *monthly payment* plan I would let the HOA allow would be one that was a PRE-PAYING monthly payment plan.

I think I might propose that you require him to pay by Credit Card to catch up for this year, and that he can start making "monthly payments" for NEXT YEAR'S Assessment amount NOW, to be set up in such a way as to be "paid in full" by his last payment on the regular annual due date.

That way, next year he can do the same thing: make monthly payments to pre-pay so that his LAST payment of the year falls on the Annual Due Date.

In other words, if your fiscal year begins in May, you would need $500 in full now, (he can get the "loan" for it from his credit card) to cover 2008 assessments, due on May 1, 2008. Then in June of this year, he can start making "monthly payments" to pre-pay for the May 1, 2009, due date. That way he won't have to pay the $500 all at once and he is "up to date" in May of each year!

That's the only fair way to proceed for the other homeowners. That way you are not in "arrears" on the annual revenue and he is always "up to date" and therefore not having the "burden" of paying all at once.

You are not a loan company, you are an HOA that has an annual budget that relies on his and everyone's $500 annual assessment to be in your bank at the beginning of your fiscal year.

If you "allow" him to make monthly payments for the year AFTER the annual due date has arrived, you are, in effect, "loaning" him the $500 for him to do with as he pleases throughout the year, without any payment to you for the benefit to him of the $500 loan.

Plus, once you do that for him, suppose 5 or 10 or 100 people want the same interest-free post-dating of their $500 annual fee?

You will forever be in "arrears" for your budget.

I see a nightmare looming.

Cathy,

It is really scarey that this one homeowner is asking for some help and the association does not sound like it is helping. Soon it might be 3 or 10 so something must be addressed.
Number one I suggest is to amend the 1 annual payment per your Documents. Break it up into quarterly payments.

Yor alternative might be worse if some of the owners just stop payments completely and then you have to deal with leins and fines and penalties. In the mean time, the Board must adopt an emergency meeting to see if they can accomodate this guy if he genuienly has had communication with Board, trying to get a resolution to his dilemia.

Cathy:

I tend to look on the brighter side of things...this person wants to make payments to the HOA, to me that is a positive. Instead of throwing late payments, interest, etc. at this person I would be happy they want to pay.

On the other end of the spectrum, if you allow this person to do it, then you would have to allow others. In the end only your HOA can answer what is right for you. I would suggest working with this homeowner to collect your dues any way you can, but also work with him to prevent this from becoming an ongoing issue. Perhaps with his monthly payment of $42 or whatever, he kicks in an extra $10-$15 to help offset the shock of next years payment?

I think your goal should be to collect the money, help the homeowner, but establish ground rules for the future so he can financially plan to achieve it.

Cathy,

You mentioned this is only your 2nd year, so perhaps the gov. docs. have not been thoroughly researched and ingrained in all the board member's minds. Sometimes it takes awhile to thoroughly understand some of these docs that are full of lawyerese. My docs state the board has the option of deciding how the assessments shall be paid, i.e., monthly, quarterly or yearly. Perhaps yours has this same clause. Monthly or quarterly is a lot easier on many people. On the other hand if someone wants to prepay the assn isn't going to say "no"! But if it isn't an option to change when the payment is due, I do think it wise to work with an individual who has expressed a hardship and is willing to negotiate a payment plan. Afterall, if you were getting ready to foreclose and the member wanted to enter into a payment plan you wouldn't deny that, would you? Well, in this case the member is trying to prevent that from happening.

We had a similar request from someone who was not in arrears, but wanted to make their upcoming quarterly payment in installments. We told them that they could make monthly payments, but also stated:

"If you are asking to pay assessments in arrears, the C & Rs do not allow this. All late payments are subject to the provisions found in the C & Rs, up to and including late charges, lien and foreclosure. I would also make you aware that all payments received are first applied to the balance of the overdue assessment, late charges and fees before being applied to a current assessment payment."

I agree with working with those who need help, maybe defer an automatic lien- a grey area in our docs now. As has been said, we aren't a bank and delinquent assessment late charges and interest is one area that our docs are very clear about.

Brad-
I agree with you, as well, if this is a temporary situation. But, I would be willing to bet that every one of the folks at my place behind in their assessments are still watching cable.

So what do you think about changing the C & Rs or make a rule for cases like this? Maybe with the current state of affairs in the housing industry this is a good time for all of us to consider putting a provision in our documents. Does anyone have any model language that has proven effective? And would you request a credit report? Proof of income? And how do you fashion it so that it isn't another time drain on a volunteer board of directors that is already putting many hours into the work of the association? We can't get folks to run here as it is.

How are others handling this?

It is a very sticky situation with so many scenarios. I hope to read more on this subject and how others have handled this in the past. Thanks for all the great input!

Cathy:

As in all cases they have to be dealt with on a case by case. You have an Owner who has communicated a need to pay monthly the HOA should try to collect what they can; if not monthly ask him if qtrly., would help him at $125.00.

If this account went to collections a payment plan would be set up anyway. You need to know your state's collection laws and make sure you follow that. I say work with the homeowner, he seems intent on paying, there is nothing wrong with making a reasonable payment plan.

Charles and Ellen:

I disagree with your statements, and I highly doubt word will spread like wildfire. What is the person going to say..."I am having financial trouble and the HOA let me make payments". Money troubles embarrass people, they don't want to talk about them. Perhaps some people will find out, but it won't be the spread of the plague.

As I stated before I am of the mindset that if someone is willing to pay, take it and work out the details with them. In this time of our economy money is getting tight. Some people are having to chose what bills to pay. If I go to your HOA board and say I can pay $50 a month, but I can't drop $500 right now and you refuse what will happen. Nothing will get paid...if this homeowner is in enough financial difficulty that this is an issue, foreclosure may not be too far down the road. I always say treat people in an HOA how you want to be treated, within reason. We are all just one accident or illness away from being in financial difficulties.

I agree with Michelle -- people like to brag, especially about beating the system. However, I certainly do agree with Brad's philosophy. I'd much rather the board be willing to embark on a payment plan than demand all the money up front. Anyone trying to take advantage of this will soon be caught and the board can act accordingly with them. I just think its in the best interests of the assn for the board to be known as a group of individuals who have compassion for those of us who may be in dire straights, rather than to be know as just a bunch of hard-noses!

Brad, some of the biggest gossips are "good old boys" who love to brag about all the cool things they pulled over on someone.

They don't see it as revealing their finances. They see it as another notch on their reputations on getting one over on somebody, especially getting one over on the HOA.

The "guess what I got away with" factor is alive and well and most people don't really care as much about what other people think about them. The interesting thing about the delinquencies in our HOA is that the majority of them are from people who regularly violate various CC&Rs.

On one or two rare occasions we've let a resident "break up" payments over 2 or 3 months.

But never, ever would we consider allowing "monthly payments." In addition, we tell them that if they miss one agreed-upon due date, then we add the penalties and file the lien.

Keep in mind, our assessments are only $150 a year. Not a burden to one family, but very critical to our budget and something we need at the beginning of the year, not at the middle or the end of the year. Our "write off" wiggle room is not as deep or broad as say, Citibank's.

Heck, while even our local utility company will work with people on SOME level, they are still pretty rigid about it. I can't imagine going to LG&E and saying, "Hey we're a little tight this month, how about we pay this month's bill over the next 12 months?" Sure people do it, especially in peak usage months like winter, but they have to meet all sorts of strict criteria and go through ridiculous red-tape hoops.

So IF they come to us first (and early) then we will give a small "grace period" with very explicit parameters, AND they have to sign an agreement with the "grace period" terms, which if they don't meet, we proceed with the penalties and lien.

So, if we EVER went to "monthly payments" allowed, they would have to be paid in full for the CURRENT year and the monthly payments would be structured in such a way as to be PAID IN FULL by the due date of the year for which they apply. They would need to be paid up in advance of the year we need the funds, JUST LIKE EVERY ONE ELSE.

That's the only way I could ever imagine switching to such a format for assessment payments. If they are already a "due date" behind, then we are going to have problems with OUR budget and bills, too.