The HOA delinquency collections process is about more than just recovering overdue payments. It’s about fully understanding the two traditional approaches that ultimately work toward the same goal: debt recovery. Collections agencies and lawyers both serve a purpose, but in vastly different ways.
They also aren’t your only opportunities for success.
Knowing the purpose of each will inform communities of the harsh realities of each one. This understanding can transform an HOA’s approach to managing delinquencies while maintaining both relationships and accountability.
The Limits of Traditional Collections Agencies
When you think about it, there’s a lot of appeal to using a collections agency for debt recovery. They alleviate the burden of chasing delinquent maintenance fees and claim to offer an approach that’s all about engagement. And it sounds great, right? They’re the ones who track down the homeowner, who handle engagement and collect—they do all the dirty work you don’t want to!
Unfortunately, a debt-buying collection agency is simply not an option for any HOA.
Contentions With Collection Agencies:
- First and foremost, HOA debt cannot be sold because it is not stagnant. It increases every month with fines for violations, special assessments, and late charges, not to mention the recurring assessments. Local and state laws, as well as some governing documents, can all have language prohibiting this action. Additionally, sale of debt can open a community up to accusations of failing to fulfill the fiduciary duties of the board. Overall, selling debt is not even an option for communities nor is it a business for collection companies.
- Even if an HOA could sell off HOA debt, you’d have already lost a majority of the assessments for good. Your debt would go for 5 cents on the dollar, which can only hurt your cash flow.
- Not all collections agencies are compliant or follow the rules. The collection agency you choose should maintain a culture of compliance which will prevent your neighbor from being harassed and treated in a deceptive manner. Even though collections agencies are expected to follow the Fair Debt Collection Practices Act (FDCPA), not all of them stick to that, and that hurts your fellow homeowners, and ultimately the community itself.
The best solution is to find instead a collections service that uses technology, communication techniques, and payment plan options to facilitate debt recovery. Especially seek out those that are knowledgeable about HOA debt collection and the workings of community associations.
The Hangups of Attorneys
When the HOA retains a lawyer, it’s a signal that they’re prepared to pursue legal action to resolve the debt. Lawyers have only one path (litigation) and ultimately have the authority to enforce consequences. They’re the ones who step in when other efforts have been exhausted. This is one of the main reasons that friction and adversity have become a part of your community’s culture.
Reasons to Avoid Attorneys:
- An attorney’s only tools are liens and foreclosure. They don’t have a timeline, though, because they get paid even if the account doesn’t resolve quickly. This means your debt recovery goals are misaligned.
- A lawyer’s involvement tells the homeowner that the HOA is committed to putting them out of their homes and has stopped trying to engage and resolve in an amicable manner. Escalating an account to an attorney should be the last desperate attempt to collect.
- In most cases, debtors are quite frustrated trying to contact “collection” attorneys because attorneys do not have call centers to provide customer service to their clients.
When it comes to assessment collections, attorneys have their place—not every account can be recovered through communication or payment plans. For accounts that cannot be resolved with tried-and-true practices, attorneys can be the final push to show a delinquent homeowner you mean business and start the repayment process.
Finding a Better Option for Condo/HOA Debt Recovery
Here’s where it gets interesting.
If we use these roles thoughtfully, and with the right tools, they can complement each other. Start with courtesy letters from the association board of directors, but know that courtesy letters usually go from the right hand, to the left hand, and then straight into the garbage can. A courtesy letter once a month simply does not create a sense of urgency.
If (or when) those don’t work, be ready to try something new. Rather than engage a standard collections agency and risk your HOA’s financial security, consider handing the file over to a specialized collection service and technology platform. This solution should use skip tracing techniques that are not available to community association management companies or board members. They should handle outreach and communication, and work with the homeowner in a way that’s productive, cooperative, and centered on getting things back on track. It’s about the residential HOA experience which sometimes includes unpleasantries.
Then, and only then, should a community escalate HOA debt recovery to an attorney—when absolutely necessary. If you do this, and take these steps responsibly, the decision-making changes—now you’re thinking strategically rather than making a knee-jerk reaction.
Choose Axela
At the end of the day, the goal isn’t just to collect—it’s to preserve the community’s integrity and well-being. It’s about creating an experience for homeowners that shows both empathy and accountability that supports full debt recovery.
Axela’s collection technology solution is a unique and client-friendly approach that does exactly that. Instead of relying on traditional contingency-based collections, where agencies take a percentage of recovered funds, Axela passes collection fees through to the delinquent owner and defers them at their risk. This deferred, no-risk payment model means the association doesn’t come out of pocket for any collection costs or fees. we stand by our commitment with a simple promise: “If we can’t collect, the association doesn’t have to pay.”
Using a collection technology solution like Axela will reduce the need to send files to your attorney in nearly every case. It’s just not necessary to send secured debt on properties that have equity to an expensive foreclosure process. For those hard cases, use your attorney as needed. The HOA can provide a sense of support to those who need it and a sense of consequence to those who disregard their responsibility.
Let us help you put an end to your debt recovery journey. Contact us today for more information about how we can bring a perfect cash flow scenario to your community at every pay period.
