Delinquent payments are one of the hardest things to deal with as an HOA board because you may be dealing with people who are your friends and neighbors. Although there are certainly strategies for avoiding delinquent payments, every board will likely encounter this problem at some point. Here are a few ways to avoid delinquent payments, and what to do when you can’t.
Avoiding Delinquent Payments
Construct a Written Delinquency Policy
Establishing a written delinquency policy is a great way to discourage residents from getting behind on their payments. A written policy helps to inform incoming residents of the consequences of not paying their dues. The policy should lay out the escalating steps that will be taken in the event of a late payment. Have a lawyer check the policy to make sure that it is watertight and reasonable.
Make it very clear that a fine will be levied for late payments. The fee can be negotiated by board and added to the policy.
Invest in Online Technology
One of the best ways to get homeowners to pay their dues on time is to invest in online software that allows residents to set up an automatic monthly payment. Many homeowners simply forget to pay the dues, and this online option is convenient and easy to set up with the appropriate software or finance management company.
How to Handle Delinquent Payment
Be Consistent and Act Fast
Your homeowners association should be treated by the board as a business. In so doing, you will be treating each homeowner the same. Leniency with one resident will lead to leniency with every resident, so be sure that your board reacts consistently and quickly as soon as a payment is late. It is possible to be both firm and polite in your execution of the late payment policy.
If a late payment becomes a problem, the wisest course of action is to hire a professional to handle the case. In so doing you can avoid the gossiping and personal offense that would be inevitable between neighbors on the board and neighbors making late payments.
Be Open to Payment Plans
The HOA should be open to a payment plan of the late dues in addition to their monthly payments. This type of open communication and compromise can do a lot in keeping the peace between the board and the resident. An amendment to the CC&Rs may be necessary to allow payment plans to be implemented.
Court and Liens
In the event that the homeowner is disagreeable to your requests and negotiations, your options remain open to either take the resident to court, or file a lien. A small claims court can add the power of the law behind your efforts. Liens are a guarantee that your HOA will get the money by deducting the amount of the debt from the profit earned upon the sale of the property.
Delinquent payments can be catastrophic to your HOA, destroying your annual budget, and putting you behind financially. As a board you should do your best to be firm, consistent, and prepared so that if faced with this problem, you can respond quickly and appropriately.