Assessment collection is imperative to keep an HOA running smoothly.  Too often, HOAs find themselves facing a high delinquency rate.  This affects both individual homeowners and the community as a whole.  What happens when an association’s delinquency rate is too high?  What options does the HOA have to collect?

The bottom line here is that when the association’s delinquency rate is high, the entire community suffers.  The lack of cash flow makes it nearly impossible for the community to function as it is supposed to.  Dues are generally set at a certain amount that will give the community the funds that it needs to run.  The amount is usually not higher than necessary, which means that when the dues aren’t coming in, the HOA is running in the negative.  This can result in:

  • Deferred maintenance, potentially resulting in safety issues
  • Decreased contributions to the reserve account, and in some cases, using the reserve funds for paying current bills, which will hurt the community in the long run should any emergency arise
  • Increased assessments. This results in a large burden in individual homeowners, as some are left to pick up the slack for those who aren’t paying.

A high delinquency rate, usually anything above 15%, will also interfere with a community’s ability to get Fannie Mae mortgage backing.  This will result in difficulty buying and selling within the community.  The community will also see deteriorating property value.

So, what are the HOA’s options when faced with high delinquency rates?

First and foremost, be sure that there is a standard policy in place for collections.  Be consistent in enforcing the policy and avoid making any exceptions.  Your assessment collection policy should be published in the CC&Rs.  If you’re seeing problems in your community, you might want to consider distributing the policy again to individual homeowners.  This ensures that every owner knows the process, knows the amount due and when, and knows the possible repercussions for delinquency.

Repercussions available to the HOA include:

  • Assessing fines
  • Revoking privileges such as pool or gym pass, assigned parking, etc.
  • Turning off water or other utilities
  • Assessing a lien against the property
  • Getting a third-party debt collector involved, consider reporting the delinquent debt to the credit bureaus

One last piece of advice is to talk to those homeowners who are consistently falling delinquent on their dues.   Sometimes, a personal meeting or letter will spark a conversation that will be beneficial to both parties.

For more information about our HOA management services, contact Spectrum Association Management today and one of our team members will be sure to reach out and show you why we’re refreshingly different.