5 Ways to Reduce Assessment Delinquencies

January 7, 2013

By Curtis G. Kimble.

Our law firm helps many HOA boards and managers collect past-due assessments (dues) from members.  Collecting on delinquencies is not easy work in any event, but it can inadvertently be made even more difficult than necessary by a manager or board.  Here are 5 ways to help ensure delinquencies can be collected in a timely manner.

1.  Have a collection policy in place and let your owners know about it.  A collection policy should explain due dates, when late charges are incurred, the interest rate on late amounts, returned check charges, and what actions will be taken on delinquent accounts and when.  At the same time, a collection policy should be somewhat flexible, rather than taking a hardline approach requiring a series of actions taken at set-in-stone dates.  Seek the advice of the association’s attorney because many laws and the association’s governing documents must be taken into consideration.  Finally, follow all the steps in the policy.

2.  Ensure the names and addresses of owners are accurate and up to date.  Sure, it’s generally the job of the owner to ensure the association has an accurate mailing address.  But, a board can avoid some headache by doing what they can to ensure accurate contact information.  Try to ensure actual contact with an owner is made before sending their account to collection.  Be aware of returned mail and vacant properties.  The primary complaints we see from owners are, “I’ve never heard anything from the association” and “if they had just knocked on my door and talked to me about it.”

It’s not a volunteer board member’s job to go knocking on doors to collect money, rather, it’s the individual owner’s duty to make sure their debts are paid.  Additionally, casual collection procedures that embarrass owners should be avoided.  But, communication is key, and communication can’t occur without accurate owner information.

3.  Implement effective procedures that will identify accounting errors.  Every HOA must use good, basic accounting practices.  I’m not saying every small association must strictly use GAAP (Generally Accepted Accounting Principles), which is a codification of how CPA firms and large corporations prepare and present their business income and expense, assets and liabilities on their financial statements.  But using a homemade accounting system on a spreadsheet or hand-written ledger can be a recipe for a mess and can significantly delay proper collection remedies.

Ideally, use bookkeeping software that will give you reasonable reports of every individual property account with a history of charges, payments, and a running balance.  Make notes that identify payments by check numbers and sender’s identity.  Identify charges to the individual’s account by item or purpose.  Be able to provide an accounting that will clarify the what and why of an individual’s balance at any given time.  When switching accounting systems or switching property managers, make sure to have a means or require a means of providing the history for any balance forward carried into the new system.

4.  Take action when assessments remain unpaid.  The association has rights that should be preserved early on with a delinquent account.  Follow the association’s collection policy.  Ensure letters are sent to the owner, a lien is filed against the property, and additional remedies are being pursued, as appropriate.  The more time passes, the harder it will be to collect.

5.  Take collection action uniformly and consistently with all owners who are delinquent.  Do not let personality conflicts or personal relationships factor into the actions taken on a delinquent account.  Treat all owners equally and fairly.

Associations that consistently follow good and effective practices, such as the ones listed above, have more success obtaining the cooperation of the owners and collecting delinquent assessments without having to resort to extreme legal measures.  Contact us if you’d like assistance implementing any of these practices or to help your association collect on delinquencies.

New Utah Law Requires Registration by HOA’s

April 28, 2011

A new Utah law for HOA’s  goes into effect shortly that requires both condo and non-condo  homeowners associations to register as an HOA with the State of Utah by July 1st, 2011, and to keep info updated when directors change over time.  This is completely separate from registering as a nonprofit corporation with the Division of Corporations. Now HOAs that are nonprofit corporations will need to do both (the law doesn’t require an HOA to be a nonprofit corporation, but it is recommended and is typical).

The consequence for not registering an HOA and keeping the information updated is that the HOA will not be able to enforce its liens against delinquent homeowners.  This is a huge (and harsh) consequence, obviously.  So, it is imperative that HOA’s register and keep their info current with the state, or they will lose their lien rights when collecting past-due assessments.

Along with a registration fee not to exceed $37.00, each HOA has to provide the following to the state and kept it updated whenever the information changes :

  • The name and address of the homeowner association
  • The name, address, and telephone number and, if applicable, email address of the president of the association
  • The name and address of each management committee member and contact information for the manager, if applicable
  • The name, address, telephone number, and, if the contact wishes to use email or fax for communicating information, the email address or fax number of a primary contact person who has the lien payoff information a closing agent needs in connection with the closing of the sale or refinance of a lot/unit

Another new law states that lien payoff information must be provided by the HOA within five (5) business days from when a closing agent makes a proper request for it (has to be in writing, be accompanied by a written consent for the release of the payoff information signed and dated by the owner, etc.), or the lien is not enforceable at closing.  Also, the association is now prohibited from charging a fee for providing payoff information needed for closing on a unit, unless the fee is specifically authorized by the CC&Rs, bylaws or rules, and the fee can’t exceed $50.  Ascertaining payoff information for a delinquent owner is an administrative burden on the HOA that is appropriately paid for by the offending owner, not shared by the other innocent, paying owners.  So, the board should adopt a rule right away authorizing a fee for providing payoff information.

It’s important to note that assessments are both a lien on a unit and a personal debt of the owner.  So, while the lien may become unenforceable by failing to adhere to this new law, the past-due assessments will still remain the personal debt of that owner, even after they sell their unit and move on.  So, an action in court could still be pursued by the HOA.

The state has not set up a way to register yet, but we’ll provide updates on this issue and more information on how to register as it becomes available.

UPDATE: The registry is up and running. Read about it in this post.

Curtis G. Kimble

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