HOA communities solely run on fees paid by the homeowners. Handling late fees and notices in an HOA community is an important part of being on and HOA board.
Services, such as road repair, trash removal, facility maintenance, and more, can be severely disrupted or canceled if members don’t pay their dues to the association. Even a few homeowners failing to pay can have a significant impact on the HOA’s budget. The late fees must be collected, or the entire community can suffer. Not only can services end, but a worst-case budgetary impact is a bankruptcy of the HOA.
Board members must ensure payments are received, as they are in charge of making sure the HOA is running well. Any budget problems that come up will fall at their feet; there is no one else responsible.
Not only is there a budgetary need for the homeowners’ payments, but the owner must pay. The homeowner agreed to the fees when they accepted the HOA rules. These fee rules make sure the HOA is functioning as it should – providing excellent services and benefits by sharing the costs among all the homeowners.
Your HOA should have a written, established course of action if you wind up having to pursue payment. We will outline some of the most common procedures HOAs use to seek late fees and notices below. Remember that the enforcement and collection procedure for your association must follow state law and your association’s specific bylaws and Declaration of Covenants, Conditions, And Restrictions (CC&Rs). Your state may also outline what actions HOA boards and homeowners can take when dealing with late payments.
As soon as a payment is late, the association should contact the homeowner by phone, email, or letter and give them a polite and friendly notice. It’s better to get on top of it early. Instead of letting a couple of months pass, which can then cause more significant problems later. It might feel awkward letting a friend or neighbor know they owe the association money. Still, the HOA is obligated to provide community services. If several members are several months late with their dues, it could have a real impact on the overall community. A friendly reminder could be enough to solve the problem.
If the friendly reminder doesn’t work, the HOA can send a more formal “demand letter”. Which notifies the homeowner of the amount due, the fees that will accumulate, and options the HOA has to take further action.
Some associations offer a waiver of the late fee, depending on the circumstances. For instance, if the community member has consistently paid on time, and this is the first late payment, the late fee can be waived. If your board does grant waivers, make sure you give the waivers fairly and consistently. And there are some HOAs who never grant any waivers, so they are not a requirement.
One of the fastest and easiest ways to resolve late payments is to agree on a detailed payment plan for the homeowner. Often, late fees and penalties will be waived once a payment plan has been put in place. HOAs have reported having great success using payment plans. The money has been paid, and the homeowner has given a break when they might be having unusual circumstances in their life that are impacting their finances.
If notices, reminders and a follow up for late fees have not worked, many HOAs next take the step of limiting services for that homeowner. They take away access to the pool, fitness center, or other community facilities. This impacts the homeowner while still abiding your community’s covenants, conditions, and restrictions (CC&Rs).
The next step is usually filing a lien against the property. After the lien is recorded, most states will allow the HOA to pursue payment by foreclosing the property. Many HOAs report that just notifying the homeowner that they have won the right to foreclose jolts them into paying. Keeping the Hoa from ever having to sell the property.
The HOA board can also take the homeowner to small claims court, but state regulations vary on some critical aspects of this approach. One thing that does not vary is most states have a limit on what the HOA can collect if they win in court. Often that is only $5,000.
Another option to enforce fee payments is a lawsuit against the owner, instead of the property. The option is called judgment. And it doesn’t have the highest success rate for enforcement and payment. If the association wins, the fee could be pursued through the garnishment of wages.
To help prevent late payments, thus resulting in late notices and fees, the association could set up regular reminders to the homeowners. Automated reminder emails could be sent 30 days, two weeks, one week, and then the day that payment is due. Keep lines of communication open and always be polite.