HOA board members and community association managers alike understand the pain and problems that stem from unpaid maintenance payments in the community. What exacerbates that pain is that the association now needs to come out of pocket to collect that money, and that puts more pressure on your already-squeezed, inflation-ravaged budget.
It does not have to be that way.
A Myriad of HOA Collection Options
The first thing to do is consider all the options once you have exhausted your standard HOA collection courtesy letters and association demand notices. What else can be done? Well, the association has a few choices:
- Engage an attorney to record a lien and foreclose on the property. Of course, then the association is stuck simply hoping that in the lien foreclosure sale, somebody buys your lien rights. If nobody picks up the property, you must rehabilitate it and make it a rental property until the bank comes for their collateral (remember, foreclosing on a unit does not extinguish the bank’s priority lien). And don’t forget to pay the attorney thousands of dollars on the way out.
- Go to small claims court (if the amount is small enough) and sue for a monetary judgment. However, why any business with a secured debt would go out to get a money judgment is a complete mystery. If you must go to court to collect, it is important to understand that the property in condos and HOAs serve as the collateral for your security interest.
- Notify the borrower’s bank that the property owner is not paying their assessments. That puts them in breach of their mortgage agreement, meaning the banks may pay.
- If a renter is in the unit, issue a Rental Demand Letter. In various states and in associations that have the appropriate provisions in their by-laws, communities with delinquent units that are being rented may be allowed to intercept the debt.
- Issue amenity restrictions. Many associations and state statutes allow boards of directors to restrict a person from using the amenities if they are delinquent and can even prevent a member from voting or running for the board of directors. If you have these abilities, use them because they cost nothing.
Of course, there is one more option available before you hit the red button and launch a nuclear foreclosure bomb on a member of your community: engage a professional, merit-based collections service that specializes in community association collections.
Spend Less and Collect More the Right Way
Now you might be thinking, “what is this HOA collection agency business that you speak of that a lawyer will not do for us? All we want is to recover our money.”
The first thing that a merit-based collection agency can do for a community association is to perform as they have promised to perform. That means that the good-paying owners do not have to pay for collection activity. It means that the delinquent owner should bear the burden of the cost of servicing their own debt and that the association should never come straight out of pocket for the cost of collections.
This is not to suggest that you never foreclose on a delinquent owner. But before you do so, exercise all your options that will not cost the good-paying owners in the association anything first. Axela Technologies is specialized in HOA collections. We have collected millions of dollars of delinquencies, and no community association has ever had to pay us for our collection efforts. Before you engage a collections solution, be sure to check all the boxes that let you know you are dealing with an enterprise-level company with the latest technology and the highest and best reputation. That would be Axela Technologies. Click here to get your no-cost, no-risk analysis.