While many associations are lucky enough to experience very few delinquent accounts, others are not so fortunate. Whether your community is at one end of the past-due spectrum or the other, it is still important for your community to have a formal, written, collection policy in place.
Why Your Community Needs a Formal Collection Policy
A collection policy allows the board to delegate the community’s day-to-day collections actions to their management partner so that the board doesn’t have to make a decision at every step of the process. This also allows the board to act impartially with their owners, which can be a trying task. Each member has to carefully avoid leniency with neighbors who are their friends and harshness with the neighbors they dislike. Either way, putting neighbors into collections when you know personal details about their lives and see them on a regular basis can be one of the most difficult duties for a board member to fulfill. A collection policy make this easier for the board and more fair for residents by removing almost all debate on each step taken and helping the board treat each owner equally while still ensuring that assessments are collected.
In many ways, it is even more important for the association with fewer collections to have a formally written out policy. Without a collection policy, the board may not recall the precedents set with each new case, forcing them to pull up records of how they’ve handled every past-due assessment in the past in order to make a decision on how to handle one in the present.
How to Create a Collection Policy
As collections practices vary by state, this is a process where you will need to consult with your professional community association manager or collections attorney to make sure you follow the correct process.
Your board will be given a list of questions on collections-related issues to review and make decisions on from your community manager and/or attorney. Just as it is with your other governing documents, it is impossible for a policy to cover every circumstance, but it should be able to address the most frequently-encountered scenarios and help get you on the right track. Once your board has decided on the responses to those questions, a formal collections resolution can be drafted and approved at your next board meeting and take effect immediately.
We all have concerns about money and want to be nice to our neighbors if they are in a tough place. Ultimately though, the board’s duty is to act in the best interest of the association and make business decisions for the entire community. Regardless of an individual’s specific circumstances, it isn't fair to the rest of the homeowners that pay on time to end up paying more to cover day-to-day expenses and additional attorney fees incurred because another homeowner got behind.
Once the policy is in place, the board’s involvement in regular collections actions is minimized, leaving more time to accomplish other projects.
While a collection resolution can't keep your homeowners from falling behind in their payments, having a firmly outlined plan for how past-due assessments will be addressed will allow you to commence collections of those fees sooner and hopefully with more success.