Assessment Collection Policy
I want you to give some real thought about assessments. I’m sure you already do.
Your Declaration and state law (for both condo associations and HOAs) give your Association the authority to collect assessments. Given their fiduciary responsibility, Association boards must collect assessments in a timely, systematic manner. Each Association should adopt, by resolution, the policies and procedures for the collection of assessment payments. This policy should be distributed to all members and uniformly enforced. Communication of the Association’s budget is critical to assessment collection because those members who understand the Association’s financial position and responsibility are more likely to pay their dues on time.
Characteristics of an Effective Collection Policy
An effective collection policy should:
1. Be established by a formal resolution of the Board that:
a. Specifies the problems to be solved (e.g., collection of delinquent fees);
b. Delineates the procedures to be followed; and
c. Designates the circumstances under which the procedures are required or permitted.
2. Specify only actions that are within the power of the Association and its board.
3. Set a firm due date for assessments.
4. Outline the steps to be taken by the person responsible for collection of assessments when a payment is late, with a specific timeline for each step of the process.
5. Allow for discretion in special cases (the burden of requesting special consideration should be placed on the owner). This discretionary power should be under the control of the Board of Directors.
6. Specify when a delinquent assessment should be referred to legal counsel (this step should be automatic once a delinquent assessment reaches a specific age or amount).
7. Provide for the collection of any costs associated with collecting delinquent assessments.
Timing on Collection of Assessments
Most Association Boards I work with struggle with collecting delinquent assessments. Most Boards want to get along with their neighbors and are hesitant to try to collect delinquent assessments. That’s a mistake. You just end up hurting all of the other owners that are always current on their payments. I think Boards need to be more diligent, aggressive and methodical when collecting past due assessments. Here’s a suggested timeline for your Association to follow when an owner becomes delinquent in the payment of assessments:
Day 1 Assessment due.
Day 15 Assessment delinquent.
Day 20 Property Manager (or the treasurer) sends friendly reminder to the owner.
Day 27 Delinquent account sent to legal counsel.
Day 30 Demand letter from legal counsel, with threat to file a lien.
Day 40 Lien recorded, and owner so informed.
Day 60 Foreclosure and personal suit commenced.
I recognize filing an assessment lien, and actually starting to foreclose that lien, is very confrontational. But in my experience, nothing like it gets the attention of a delinquent owner. And this might look like an aggressive approach. But if you actually have to file a lien and then foreclose it, that whole process could take 6 months. In the meantime, your Association is starving for funds.
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