Long over due association dues

Dan, obviously your HOA Board has done a lousy job of managing accounts receivable. Absolutely you can collect delinquent accounts. The means depends on your Declaration and the procedures established on collections.

I bet you will receive fewer complaints than you think but you will hear from some people because that is human nature. Plan on it. But, also, plan on the checks coming in because that is the other side of humans-to do right.
I would agree with the idea of setting this up as fairly as possible with a payment plan option over a 12-month period or whatever you have in mind.
However, as a business owner, I must say it always amazes me when someone doesn't pay their bill after we have provided a service for them (?). Do they think we work for free? "Geez, you fixed my brakes and put a new clutch in my car. I didn't realize I needed to pay you for that."

Our association has a 10% late fee applied 10 days after the due date and then $10 each month thereafter. Liens are automatically filed 90 days after the due date. The board has decided to be more aggresive in collections in that we are moving forward with lawsuits before the amount due is so high that it cannot be paid.

We have offered payment plans and as soon as a payment is not made, we move to the next step. This is the first year we moved forward with lawsuits and we are getting mixed results. One person who has never paid has their house for sale (great, lets collect from the liens and get someone in who will pay), another is refinancing (again, the liens will be paid and we will collect), another who owed almost $1,200 has paid up. Still, we have one or two who haven't done anything but once the court date is set maybe then they will do something.

I think the sooner you apply pressure and let the homeowner know the board is serious about collections, the less outstanding receivables you will have. We have some people who owe a few thousand and at this point, I'm sure it would be difficult for them to come up with the cash. The sooner you take action, the better for everyone.

Our bylaws allow us to place a lien on the property that is behind in their dues. It also allows us to foreclose on the property if the owner doesn't pay up. Our state laws allow the other homeowners to sue the board members if they do not enforce the rules. So between all these, if a board member doesn't want to be sued, then they need to place liens and or foreclose on properties that are not paid up.

We've recently gone through this with an owner who is more than 12 months behind. Every effort was made to collect the dues, including striking a deal on how it would be paid. When the owner defaulted on paying current and past due assessments, the board decided to foreclose.

At the sale, the HOA was represented by our attorney who placed the first bid at the value we needed to recover the money owed to the HOA. Since the property was worth far more than the money owed, even if we won the bid, the HOA could have turned around and sold it rather quickly and made a lot extra for the homeowners.

We do NOT like to place liens or foreclose on people, however, if we let it slide, it isn't fair to those who do pay. We would me sorely negligent if we did nothing to those who didn't pay and just let the rest of the owners carry the full load.

Hi. We are in the same predicament. The last board let monthly dues slip by and now we have owners owing more in late charges than the original balance owed. Does anyone have any experience with the "forgiveness" program, similar to the one day IRS offer or the library program, where one can pay his/her balance within a specified time period without penalty? The thought is that at least the association gets the outstanding funds and gets back on track. Would love to hear your thoughts.

I would like your thoughts on this situation. A property has two owners, #1 & #2. They purchased in late November and #1 made the December assessment payment. The following year monthly coupons were received with an assessment of $XX but #1 made no payments. The next year monthly coupons were received with an assessment of $YY and for the first time owners were notified on the coupon there was a late charge of $25 if not paid by the 5th of the month. Finally, the mortgage company who was collecting for the association realize no payments had been made or over 12 months.

The owners were sent their first dilinquency notice after 16 month. The Board met with #1 and set up an agreement to make payments plus start paying on the delinquent amount. Only #1 was offered and signed this payment agreement. After 6 months the Board wanted to change the payment plan and again asked #1 to sign a new payment agreement. #1 refused and did not make any more assessment payments.

Five months passed and #2 was made aware for the first time of the situation and was threatened with forclosure. #2 requested a Hearing with the Board and asked to review the record to determine if the amounts of assessment, late charges, and interest were proper.

#2 found the records of the association were totally inadequate. There was no record showing amounts of assessments, or late charges, or interest had ever been approved. No budgets had been approved nor ratified by the members; and there were no records on election of Board members. Accounting records were extremely limited and not in compliance with any acceptable accounting practices. Neither owner ever received a monthly notice of late charges or interest, yet other owners had received notices on late charges and also had late charges waived. They were the only owners who have ever been charged interest. Also, the Board is in violation of state statutes including having no policies and procedures on delinquent accounts.

This is one extreme example of how poorly some HOA's are managed by their Board. One more thing, the President is living out of state for the last year of her term on the Board!

The question I have is: What assessments, late charges, and interest do you think #2 should be responsible to pay?

I agree Lisa, both are liable. The next questions are:
a) Do you think late charges should be made before notification to an owner that there are late charges and the amount?
b) Do you think interest should be charged before notifying the owners there is an interest charge and its percentage?
c) Do you think any portion of the assessments, the late charges, and the interest are valid? And if so, which ones and what portion of each?

Remember there is no proof that any amount for assessment, for late charge, nor for interest were ever properly approved; and a state statute required the Board to establish policies and procedures for delinquent accounts and the Board failed to comply.

Obviously I am not communicating my questions effectively on this somewhat complex situation. I agree with everything posted but does not address my real questions. Do there have to be documents to support the AMOUNTS charged and must the owners be advised in advance of the AMOUNTS charges they may incur?

The Declaration does provide for assessments, late charges, and interest charges. This is common in most Declaratins. But HOA documents do not specify the AMOUNT of the assessment, the AMOUNT of the late charge, and only a range of percent interest. The Declaration requires the Board to approve the annual budget which includes the AMOUNT of the annual assessment; and to submit it to the members for ratification at the annual meeting. This is common practice.

My concern is about are complying with the Declaration by voting on the amount of the assessment; and documenting the vote in the minutes of the Board meeting and the annual members meeting. If there are no minutes showing the Board approved the budget and there are no minutes showing the members ratified the budget, then how can the AMOUNT of the assessment be justified? I believe the minutes must document the AMOUNT of the assessment and the amount of the late charge or else these charges are not valid. This may seem like a technicality, but what should happen if this went to court?

Also, I believe owners should be notified in advance on the AMOUNT of a late charge and the PERCENT interest charged on a delinquent account. This HOA is in Colorado where there is a law (effective 1/1/06) requiring all common interest communities to have Rules and Regulations (policies and procedures) on delinquent assessments. This HOA is in violation of that law. On a previously thread there was discussion on how this law is enforced. The conclusion was by being taken to court by some owner. So what should happen if this went to court? BTW the losing party would be liable for both parties legal expenses according to the new law.

I appreciate any opinions offered.

Thanks for your reply Michael. One very important correction to your post "HOA documents stipulate a range of interest and fees charged if it isn't paid. Therefore, each owner knows before hand what the penalty can be for not paying." This isn't what I posted. I posted the owner did not know before hand what the penalty would be for not paying; nor did the documents provide a range of fees, only a range of percent interest (which starts at none)."

Suppose you moved into a common interest ownership community for the first time and never received any notice of late charge and interest amounts, how would you react if the President tried to add over a thousand dollars to your account?

And please don't assume this is my Declaration or my situtation

I'm disappointed more people did not respond to this case history. I think it can provide food for thought on several very important issues:

1) It is critical for an association and its Board to document financial decisions by approval of motions which are documented in the minutes. Accurate and thorough minutes are critical.

2) It is important for every association to have a collection policy and distribute it to all owners. In this case there was a Colorado statute with which the Board failed to comply. How do you think a judge would react to this?

3) Owners should only be responsible for charges AFTER they are advised on the amount of those charges. Otherwise how do they know what they owe?

4) In my opinion owner #2 owes:
a) All assessment charges since the annual budgets were not challenged.
b) Late charges could be applicable after receiving coupons which made them aware there was an amount for a late charge. However late charges were not billed; not applied consistently to all owners; and no approval by the Board was ever documented in minutes. Therefore part or all of the late charges since 1/1/05 should also be waived.
c) No percent interest on delinquent accounts was provided to owners; no other owners were ever charged interest; and no approval of a percent interest to charge was ever documented in minutes. Therefore no interest should be charged.

5) Certain Board members are guilty of improper conduct and possibly discrimination. It is critical for Board members to act in good faith. They have a fiduciary responsibility and can be sued. In this case their Articles of Incorporation does not have wording which provides a "corporate shield". Hopefully their insurance would protect them.

Board members, you may wish to review this case history carefully.

I have recently become secretary treasurer for a condominium project with 62 units. We have a couple of units which are in arrears for approximately 2 to 3 years. I have only found out today that liens filed against these properties are useless because of foreclosures. These liens are $5000 to $6000 each.

Good Information - Thanks to All.

It is my understanding (Arizona) that late fees and penalties from Assessments not being paid must be collected within 3 years or they can not be inforced by a lien.
The only way to keep them from becoming uncollectable is to file a formal law suit for foreclosure. Thus requiring in long running situations, that a foreclosure must be filed every three years to protect the association.

Anyone from Arizona have information. And a legal reference? Interesting enough, I have asked my HOA Management Company and get no anwere.

Sometimes a property is owned by several people, a company, a partnership, etc. It would not be possible to notify each individual member of such an organization. Think of your county property taxes. The tax notice is sent to the address on record, not to each individual owner.



A board can only pass motions that the CC&Rs give it the authority to pass. Every owner should have examined the CC&Rs before investing in the property.

Our CC&Rs define the penalty for late payment including the option of the HOA to take the delinquent owner(s) to court.

Ron, you are correct in your examples.. I was thinking more of the county notifying one single owner in the county of a change in the property taxes, and considering that one person to have been "notice enough" for all owners in the county. In general, i was meaning that a board should not make rules in secret, hide them from the owners, and expect compliance to them...