Collecting Delinquent Assessments by felixshelsher


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									                          Collecting Delinquent Assessments

In contemplating the past twenty years in the Community Management business, I have found
the most challenging issue for board members to be the collection of delinquent assessments.

Some board members want to avoid legal fees by taking on the position of “collection
representative”. They want to be the nice guy and approach the delinquent owner personally by
way of a phone call or face-to-face meeting. This personal effort usually only works once. The
second time around, the delinquent owner does not welcome the board members as nicely
because he or she is embarrassed and does not want neighbors, including board members, to
intervene in their personal financial affairs.

The board member’s colleagues should tell him that this is not the recommended approach to
collecting past due assessments; making telephone calls and confronting delinquent owners
may engender personal risks. Most state statutes and federal laws are specific with regard to
collecting past due assessments.

To ensure a consistent and fair treatment of delinquent owners, the board should approve a
collection policy that details exactly what a delinquent owner, or an owner who partially pays or
who writes an insufficiently funded check, should expect from the association. Depending on
what is already stated in the governing documents and state statutes, a collection policy should

The amount of late and collection fees

A date when the late fee will be charged

When the account will be referred to a collection attorney or agency
Time period in which the automatic lien will be recorded

When the property will be posted for foreclosure

An explanation of the foreclosure procedure

 Confirmation that the owner is responsible for all legal fees and that the costs will billed to their

 A provision allowing delinquent owners the opportunity to pay in full or submit a payment plan
to the board for consideration

Flexibility to allow the board to consider an owner’s unique financial circumstances

 All board members must remember not to discuss any delinquent accounts with anyone other
than board members, the manager, and legal counsel

In pursuing legal remedies, a judge may award a personal judgment to Association
Management, but this does not necessarily mean the association will immediately collect the
money due it. The association may need to pay legal fees to collect the judgment if the owner is
not forthcoming with the funds. So, even if the association wins a judgment, the debt may still be
uncollectible. It may be best to write off the debt and file a report on the delinquent owner with a
credit bureau.

Boards of directors should understand that delinquent accounts prevent the community from
completing projects and/or starting new ones. Additionally, the legal system is slow and is not
always fair, but with a published collection policy and a due process system in place,
associations have a better opportunity to eventually collect delinquent assessments.

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