non-payment and Mgt.Co response

We have quite a few HOA members who are behind in their HOA fees (some are months behind) How long should our Property Mgt. wait to act and how long do you feel is a reasonable time to wait for a response. It take forever to get anything out of these folks and I'm wondering if maybe a slack Property Manager is part of the problem.

Olivia,
I would mirror image Mary's response.

John,

Shouldn't your policy have another section explaining foreclosure? I've always thought it a good idea to let the h/o's know that foreclosure is an option if assessments remain delinquent for a period of time (determined by the board and/or state law).

Mary,
As noted, I agree there should be a policy incorporated into the documents as stated by those same documents.

Do you agree the board has the power to selectively enforce a resolution as posted by John?

Mary and all,
If you are saying, the Board can selectively enforce the documents, meaning they can pick and choose what stated requirements they will enforce, I disagree. The Board is not a Collection Agency, and has no power to bestow favors to any member unless that action is bestowed on all. In fact, in any procedures I have read regarding the collection of assessments, and that is specific to this discussion, there are clearly defined actions the Board must take, and the Board may have the option of placing a lien on the property. I have seen no written provisions, and what has been posted so far, does not specify a Board has any option other than to enforce all restrictions and conditions in kind. When we advise folks to read and follow their CC&R's, we do not state we mean to follow some of these Conditions and Restrictions. It also remains a mystery to me that if the Board is empowered with such benevolence, how can that power be taken away on a vote of the members, and the members, can always select those exemplary members that also have this Solomonic Wisdom (sic).

There are folks that feel otherwise, so be it, I have no problem with understanding why they want to show compassion. But consider one thing, and I will defend my position no more. What you are supporting is no more, no less than the act of a Benevolent Dictatorship. By hiding behind their interpretation of "may" and "must" differences, they corrupt the whole.

I can also see where this is all headed and I respectfully will select my "may" option, and withdrawn from the discussion.

Robert,

Frankly, it all depends upon the exact wording of the assn's declaration. As I stated, my declaration quite clearly states: ". . .the association MAY enforce any remedy available at law or in equity,. . ." and gives the remedies they MAY use. Therefore, the board has the discretion to pick and choose which remedy they wish to employ. The declaration gives them that ability by stating "MAY enfore ANY remedy". Of course whatever the adopted policy is must be imposed on all members equally. For instance, if hardship cases are excused from fines being levied, then all hardship cases must receive the same treatment.

When interpreting the CCRs and/or state laws, for that matter, the accepted definition of "may" and "shall" must be considered. In fact there is a reason for including those exact words in these documents. The reason is that the developer or the state legislators felt that regarding certain matters the board should have the option of deciding what action to take, but regarding other matters they should not have that option. Therefore, if the CCRs and/or state laws say "may" that means they can decide whether or not to do it; however if it says "shall" they have no option but to do it. Sorry, Robert, that's the way it is whether you or I agree with it or not. :-)

John,
I would direct your attention to the Post "Foreclosure Procedures in SC."

What I am running all around the bush about here is the sections as outlined in the SC Horizontal Property Act, which is senior to the CC&r's. Several posters here agree the Board has wide latitude to use the Board given power to do as they decide. I agree the board must have broad powers to make decisions and especially under Emergency conditions. I do not agree they can selectively pick out a group of homeowners and label them Hardship and in effect treat them selectively. But I have been wrong many times so maybe this is one of them. In the post I referred you to, I am trying to define the intend of certain sections of the SC Horizontal Property Act.

George feels this section means the Board has the right, given by this section, to write off any assessments in arrears as bad debts. The way I interpret this section is that the remaining owners would be assessed, pro rata, to pick up this loss.

I understand the rationale. e.g. it makes not difference if you don't assess the owners and you write it off it is still lost money. I am not sure. It appears to me if you write this assessment money off, you must somehow change your budget, line item, by line item.

In any event, it also appears the direction for associations to engage in foreclosure procedures has to be primarily to the State Statute, because there seems to be confusion between the interpretation of their documents by some boards.

If George's read is right, I am not sure there is a conflict.

George feels this section means the Board has the right, given by this section, to write off any assessments in arrears as bad debts. The way I interpret this section is that the remaining owners would be assessed, pro rata, to pick up this loss.

I understand the rationale. e.g. it makes not difference if you don't assess the owners and you write it off it is still lost money. I am not sure. It appears to me if you write this assessment money off, you must somehow change your budget, line item, by line item.

Robert, I think you are looking at this situation in a non-standard (may I say, odd) way.

Writing off an uncollectable (i.e., bad) debt is part of doing business for an association, just like it is for any business. It is a cost of doing business. It is (essentially) an expense item, although it may be shown as a offset to income.

Your association budget should have either an allowance for uncollectable fees on the balance sheet, or an offset for uncollectable fees on the income/expense statement (i.e., budget). In business it is called "Allowance for doubtful accounts" and is an estimate of the amounts of accounts receivable that will not be collected. It is essentially, just like any other expense (but is shown as an offset on the income or asset side).

Here is an example that shows it as an offset to income:

Income
Fees (100 units at $500) $50,000.00
Less estimated amount of
uncollectable fees (2 units) 1,000.00
__________
Net fee income $49,000.00

The annual expense budget should be based, therefore, on the expectation of $49,000 in fee income, not $50,000.

It is not a good practice to budget income under the assumption that every unit will pay up. You have to allow for the potential that some units will not pay. Therefore, your expenses must reflect the lower estimate of income.

This is pretty much Introductory Accounting 101 (debits by the window, credits by the door).

Does it result in higher dues for other owners? Yes, if the expenses are based on income of $50,000, rather than $49,000.

However, if you budget expenses at $49,000 to break even and those doubtful accounts pay up, the association is ahead $1,000.

I am not entirely satisfied with this explanation, but I don't know how to do it any better.