Life is messy. Most days we can predict the direction the mess will take us, but sometimes, it thrusts us somewhere unexpected. Loss of income, sudden medical expenses, a death or serious accident in your family–all of it can force your hand financially when it comes to the variety of bills (including your condo or HOA dues) you juggle as a homeowner.
Now more than ever, homeowners are facing financial struggles and are being cornered into making difficult decisions. With inflation costs skyrocketing, and wage increases too lean and sluggish to offset those rising costs, more and more people are having trouble making ends meet. Milk may not be $11 per gallon just yet, but with an average cost of $4.64, it’s still a pricey necessity for many.
Cutting out luxuries or higher-priced necessities is one of the first steps we take when struggling with money. But when that doesn’t always cut it, and bills sometimes end up going unpaid. Many feel that their condo or HOA dues are at the bottom of the list when facing this situation. On the surface, the ramifications seem to be less impactful than other bills you owe.
For example, even if your monthly assessments cover your internet or cable usage, skipping a month or two won’t cut off your internet access right away, but missing a car payment or two could get your car repossessed and hurt your credit score. The decision looks to be a lesser of two evils situation, but the reality is that there are hefty consequences for everyone involved when you don’t pay your HOA dues.
The Community Pays For Those Missing HOA Dues
When a member of the community consistently fails to pay their HOA dues, the rest of the community is unfortunately tasked with picking up the slack. This might not sound so terrible–if only one homeowner out of 500 is a few payments behind, what’s the harm? But the reality is that delinquency is rarely a single homeowner–life is messy for everyone! And as we’ve said in the past, even a delinquency rate as low as 3% can be harmful to a community.
The way communities operate is by creating and sticking to a set budget every year, and that budget is based on the expected income from the condo or HOA dues. Budgets do account for some percentage of delinquency, but if that percentage is too low, the numbers for the whole year of maintenance, repairs, and capital replacements or additions are off and can hurt the community long-term.
If delinquency persists long enough, a whole new problem arises: the board may be forced to consider a higher increase in monthly assessments, or even a special assessment at the next budget approval meeting. Instead of the average 2 – 5% increase, a community with high or long-term delinquency issues could face much higher increases to offset missing funds for important capital improvement projects.
The Association Can Foreclose on Your Home
When a community has high delinquencies, the HOA or condo board has limited options available to them.
When a homeowner fails to pay their condo or HOA dues, the association’s first step is a series of violation notices, warnings, and late fee notices that a delinquent homeowner receives. These notices aren’t scary and are subject to strict regulations so that recipients don’t feel harassed or threatened. Not really a compelling reason to pay back missed monthly dues in a hurry.
Some community documents allow the board to restrict amenity access, like swimming pools or workout equipment, for delinquent homeowners. But that is not the standard, and also not a strong motivator to pay back what is often thousands of dollars in missed payments, late fines, and interest.
The unfortunate truth is that the strongest action a community can take to force a delinquent owner’s hand is to place a lien on your property. And once they do, they’re entitled to foreclose on that lien to attempt to recoup the unpaid debt, forcing you out of your home.
At Axela, we staunchly believe that a foreclosure should be the last, desperate attempt an association makes against a delinquent homeowner. However, for many communities, it is the first resort.
What’s the Answer?
The reality is that there are no easy answers when it comes to financial hardship. Bills will inevitably go unpaid, and all will have some measure of consequence. It’s just important to understand what all of those consequences look like, big and small, and foreclosure on your home is one of the most dangerous around.
If your community is struggling to collect delinquent assessments, Axela can help. As a collections agency that specializes in ethical collection processes, our experts are trained to shoulder the emotional burden of financial struggle without demonizing delinquent owners. Call today for a no-cost, no-risk consultation.