How One HOA Policy Can Change the Way Communities Recover Debt

HOA collections is about as comfortable a topic as traditional collections (which is to say, it can get pretty uncomfortable). No one likes to think about the whole picture that debt collection brings to mind. Utilities going unpaid, medical bills piling up, homes being ripped away from loving families…it’s hard to separate the money from the person. 

As a Board Member, there is another side of the coin that you also have to consider, and that’s the ripple effect in a community where cash flow is drying up. When some homeowners don’t pay their assessments, the community has to change. Amenities shut down and maintenance delayed due to lack of funds. The money has to come from somewhere else. 

It’s important to keep in mind that beginning the collections process can be a kindness to the rest of the community so as not to put undue burden on others. If left unchecked, delinquencies can become a big problem for your association. It isn’t unusual for someone to miss a payment or two, but these debts can quickly swell and cause major (but not irreparable) harm to your community. 

Fortunately, there is a way to tackle this problem directly: the adoption of an HOA policy to your governing documents that prioritizes consistency and offers every homeowner a fair chance to handle outstanding debt before it can grow out of control. Every community needs a Uniform Collections Policy. 

The Advantages of a Uniform Collection Policy 

This HOA policy does not just define actions against delinquent homeowner It serves to protects the community at large. Some of the policy’s advantages include: 

Defines the Process and Sets Expectations 

A well-written UCP will clearly state the timeline homeowner can expect to see regarding recovery actions that will be taken by the Board. For instance, a policy may lay out the following action timeline: 

• When a courtesy letter will be sent out one after a unit falls into collections. 

• When the file will be sent to a collection agency for action (typically when a unit is 75 days past due). 

• When the initial demand letter will be sent out by the collection company. 

• When a notice of intent to lien will be sent out. 

• When to expect inbound calls and who to call when there are inquiries. 

• When credit bureau reporting will commence. 

• If the association will accept payment plans options. 

• How to best get a delinquent file released from collections. 

Provides Clarity and Protection 

A written and documented policy that dictates a timeline and list of collections actions provides homeowners with a clear and established framework of how delinquencies are going to be handled. Ideally, this will encourage homeowners to pay their dues in a timely manner.  

Even still, some people may fall behind—we all know how life can be, right? A documented HOA policy gives the community a leg to stand on should a delinquent owner want to push back against any recovery activities. By spelling out the specific steps of the collections process, the Board can better defend themselves if and when action needs to be taken. 

Consistently following an established UCP also helps Boards avoid accusations of selective enforcement. When Boards fail to follow the exact recovery steps across all delinquencies, homeowners can feel targeted and like they are being treated unfairly. A UCP that is diligently obeyed can make sure all homeowners are treated fairly. 

What a Strong Uniform Collections Policy Should Include 

This HOA policy should include a few key things, and many follow a similar structure to be easily understood. 

Start with Document Support 

A uniform collection policy should first reference supporting governing documents. Including sections from other relevant HOA policy documents shows homeowners that they did agree to this obligation. It also reiterates the Board’s authority and fiduciary duty to enforce the collection. Such documents with relevant sections might be in the Declaration of Covenants or the Articles of Incorporation. 

Be Specific 

The collection policy should describe a plan of action and a strict timetable of action deadlines. You need to set a specific amount of days a unit can be delinquent before being considered “in collections” and when to send out demand letters or, if need be, file a lien. 

Take the First Step to Protect Your HOA 

Eliminate risks associated with delinquent homeowners by crafting an HOA policy specifically designed to support strong collections. A uniform collections policy is the best front-line defense against a delinquent homeowner who decides to claim discrimination. To receive the maximum effect of a written collection policy, publish or issue the document annually to all homeowners and post it on the association website. 

And remember, a UCP cannot enforce collections for you. Following the steps of the policy every time delinquency happens is the best thing your Board can do. 

If your community needs help drafting and establishing a UCP, our Sample Uniform Collections Policy template can help get you started. You can also contact us to assess your community delinquencies and determine how leveraging a collections software product can help.