HOA late fees are a common problem in community associations. Some owners who are in financial difficulty, choose to pay their mortgage, utilities, and credit cards over HOA fees. The number of delinquencies is high across the United States. Owners may think the Board won’t come after them, but the board has to do what is best for the HOA.
What HOA Fees are for
HOA dues fund the budget for all association expenses. This includes maintenance and landscaping as well as the reserves. All owners need to contribute on a monthly basis to ensure the budget and reserves are properly funded. When some owners don’t this puts a strain on the bank accounts, and means that the board may have to dip into the reserve fund.
Every HOA should have clearly defined rules for what happens when owners fail to pay their monthly dues. There is normally a grace period for payments, and after it ends then fees apply. The first step is usually a letter from the Board informing the owner that their HOA fees are late. Depending on the HOA’s CC&Rs, the board may charge a small HOA late fee for paying late. Every state has different maximum amounts that HOAs can charge in late fees.
If that doesn’t result in payment, a more strongly worded letter can be sent. The owners should be notified that the Board has the ability to place a lien on the property if the fees aren’t paid. After that, the Board should get their attorney to file a notice of lien. This prevents the owner from selling without satisfying his debt and preserves the rights of the association. If it becomes necessary, the Board can foreclose on that lien.
Steps to take control of late fees
1. Don’t allow the delinquency to get out of hand. It’s definitely not pleasant to take legal action against a neighbor, but it’s the Board’s duty to ensure everyone pays their dues. That means that late fees should be applied when the grace period ends.
2. Have a consistent policy. Regardless of what the policy is, it should be the same for everyone. If you have difficulties applying a policy, then you should check your bylaws and see what is laid out for delinquencies. You can also talk to your property manager or attorney to see if they can help you.
3. Don’t let emotional pleas get to you. It might be tempting to bend the policy for someone who’s been unable to work due to an illness or has been laid off, but the Board should stand firm. Regardless of the situation that resulted in the delinquency. The rules need to be the rules because most people will be able to come up with a compelling story as to why they were unable to pay.
4. Having said that, if you can, then it’s good to create a payment plan with the owner. Some States allow associations to do that, and it can be very helpful for both the owner and board. Normally, the board stops charging late fees every month. Instead, they charge ongoing fees and do assessments to see if the owner is following the plan
5. The board can also go to the small claims court or get a lien, as we mentioned above. This should be a last resort, but it may be necessary. When you get a lien then the board can foreclose on the home, if it passes a vote.
Conclusion
One of the hardest things about being on the board is that you represent your HOA. That means that when an owner doesn’t pay their fees, you have to defend the HOA and charge late fees. It may even go as far as having to foreclose on a resident’s home. However, if you have clear communication with the member, then it shouldn’t go that far.
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