Even though the penalties for failure to submit timely HOA and condominium fees and assessments are clearly detailed in almost all condominium and HOA association governance documents, the method for collecting those fees isn’t typically spelled out. Further, there is rarely any mention of the use of an HOA or condominium association debt collection agency listed within community association governance documents. If it isn’t listed in the association’s documents, from where does an HOA Collection Agency draw its powers? Is it even legal for a condominium association or HOA to hire an HOA Collection Agency to collect delinquent fees and assessments owed to the association? If so, what does an HOA Collection Agency actually do?
Who has the power to hire an HOA Collection Agency?
When a homeowner or unit owner within an HOA or condominium association becomes delinquent in either their common fees, special assessments, and, in some cases, fines or other penalties, the HOA or condominium association Board is tasked with collecting any delinquent fees for the good of the entire association. It isn’t a personal decision to act; it is a corporate mandate created by the very documents that created the association and gives the Board its powers.
The power to delegate or engage third-party contractors to perform the work of the association is a power of the Board that most understand. The association could not function if the Board didn’t have the power to hire vendors, negotiate contracts, receive funds, pay vendors, and so on.
The same power applies to the Board’s decision to engage the services of an HOA Collections Agency should the association experience delinquency of any sort. Given the need for specialized skills and expertise in collections, it is actually in the condominium association’s or HOA’s best interest to hire a skilled third-party expert for this task. For many Boards, that means using their power to hire to engage the services of a professional HOA Collection Agency to handle this challenging task.
What are the laws that apply to collecting Condo and HOA debt?
There are no federal and state laws that prohibit condominium associations and HOAs from hiring an HOA Collection Agency to collect their delinquent fees. In fact, the Fair Debt Collection Practices Act (FDCPA) is used to govern all firms engaged in actively collecting debt. This law is in place to protect the consumers. By hiring a reputable and skilled HOA Collections Agency, the Board is actually avoiding risk by making sure that the FDCPA is observed and that their delinquent homeowners or unit owners are treated fairly and legally while the debt is being collected. The condominium association or HOA may send some simple “late payment” letters in the early days of the delinquency but as time goes by and the debt grows larger and goes unpaid longer, the chances that the condominium association or HOA are going to see the debt resolved on its own lessens and the need for next steps becomes clear.
When it’s time to engage the services of the HOA Collection Agency, condominium association and HOA Boards need to know what the HOA Collection Agency is going to do.
What does an HOA Collection Agency Do?
While we cannot speak for every collection agency out there, our own process for condo and HOA collections is transparent and thorough. We do this to avoid any mistakes, and to make sure all debtors we work with are treated fairly and with respect. Before any collection work begins, we establish an accurate fact pattern by investigating the following items:
- Property appraiser’s site search.
- Court records to review and analyze the mortgage to see what balance is left.
- Review the mortgage and make a roster of who the bank or mortgage server is.
- Search for all liens that may be on the property.
- Conduct an analysis as to the value of the property so that the association knows the equity.
- Conduct a Skip Trace on the unit owner to determine accurate contact information, determine if they are in bankruptcy, seek out assets, and have a good understanding of the subject debtor.
- Review association’s governing documents to be sure that everything is being done as per association by-laws.
Axela Technologies also works closely with the condominium association or HOA to find out:
- What do you know about the delinquent unit?
- Does the unit have equity in it?
- Who is the owner, and do you have their contact information?
- Is the owner in bankruptcy?
- Is the owner alive or is the matter in probate?
- What bank or institution is holding the mortgage and note?
Axela Technologies then reviews the following items with the condominium association or HOA:
- What should you know about your governing documents?
- Do your governing documents allow for joint and several liability?
- Does the debt of a seller roll over to the association or is the new owner liable for the past due debts?
- What is the trend of delinquencies?
- What is the permitted late interest & late fees?
- Has the association previously foreclosed on units and how did that work out for the association?
What is involved in the HOA Collection Process?
Once all of these questions are answered, the HOA collections process begins. The collection process itself involves engaging with the delinquent homeowner or unit owner and working with them to get themselves back on track and caught up with all of their delinquent common fees and assessments. At Axela, this is done through an omnichannel outreach effort, such as outbound calls, email and US mail. When necessary, credit bureau reporting is engaged. If the association is amenable, a payment plan can be suggested to help the delinquent owner square the debt.
The goal is not to lien and foreclose as that may or may not help the association recover the delinquent funds. In fact, foreclosure is an option of last resort because that extreme measure may actually prevent the association from ever becoming whole and have them spending extra money on legal fees chasing a debt that may be uncollectable.
Why Your Community Association Should Engage Axela to Collect Your Delinquencies
As you can see, Axela Technologies performs a great deal of work for each and every delinquent unit owner within the condominium association or HOA. It benefits the condominium association or HOA to fully research what services an HOA Collection Agency will perform on behalf of the association BEFORE they engage the services of any HOA Collection Agency.
Our success rate speaks for itself with as few as 5% of the homeowners or unit owners we are tasked with collecting from may actually need to force the association to go the foreclosure route. Even in those cases, we advise the association on how to recover their delinquent fees and legal fees in post-foreclosure surplus funds when available.
If your condominium association or HOA needs to engage the service of an HOA Collection Agency, get in touch with Axela Technologies today!