When owners don’t pay their association fees, the rest of the property owners have to make up the difference through higher fees, special assessments, or reduced spending on community amenities and upkeep.
If the unpaid assessments are large enough, the condominium or homeowner board can face a financial crisis with devastating effects. Sizeable debt can cripple or destroy an association if it is not resolved.
Many banks will not loan an association money for capital improvements if 8% of an association’s units fall behind on their payments. At 15% delinquency, they can no longer attain a federally backed mortgage, meaning that only cash buyers are eligible to buy foreclosed units. Because there is no competition from traditional mortgage-backed buyers, cash buyers pay far less than what the property should be worth, and property values drop.
The U.S. Census Bureau says that HOA fees average $420 annually for single-family homes and $2,400 for condos. An association’s budget can quickly be destroyed when even a few homeowners stop making their association fee payments.
Experts say that non-payment of HOA & COA fees is one the top problems facing condo, single-family, and other planned development associations nationally.
Trying to collect assessments can be expensive, frustrating, and confusing. But associations do have a variety of strategies available for them to collect unpaid fees.
When it comes to collecting past due accounts, sooner is always better. Even though it may be uncomfortable, associations need to be absolutely unforgiving on paying dues. Let the owners know upfront what is expected, and the exact actions that will be taken on late payments. Remind owners of these expectations on a regular basis.
Draw A Hard Line
Once the board has established the precedents, never vary. Don’t forgive late fees, fines, or legal fees. If you let one delinquency slide, you open the door to even more problems.
Understand Your Options
Read what your association’s bylaws say about can be done about delinquent dues. Understand these options and seek expert help if needed. Make sure you know the costs of any actions the board could take.
Depending on the association’s bylaws and state laws, you may be able to take away the right to use facilities such as pools, gyms, tennis courts, and common-area privileges. This tactic also is helpful with rental units. Tenants will typically put pressure on their landlord if they can’t use the amenities.
Stay tuned for Part Two in this series with more ideas on what associations can Do to Collect Delinquent COA & HOA Fees?
LM Funding provides funding solutions to condo and homeowner associations (COAs & HOAs) to recover delinquent association dues and guaranty future association budgets using proprietary technology.