Assessment fees are the lifeblood of a managed community's most important services, such as maintenance, security, and community association management. Consequently, most communities have a policy for collecting delinquent assessment fees. However, the ability to collect them absolutely depends on having the authority to do so. When new board members are elected, they become familiar with the fee collection policy, but they should also know the types of authority that enable them to collect fees; it will help them dialogue with the community management services provider, or the community's attorney, if delinquent fees are subject to legal measures.
Governing Documents of the Association
The first line of authority for collecting fees is the association of governing documents, such as the declaration of covenants, by-laws, and rules and regulations. These documents establish the mandatory nature of assessments, the authority to collect valuation fees, procedures for collecting delinquent fees, reasons for levying fines for late payments, and the procedure for collecting attorneys' fees and other costs associated with fee collection.
Also known as case law, common law allows delinquent payers to be sued for breach of contract. The declaration of covenants establishes a contract between residents and the HOA. When the contract is violated according to the governing documents, the community's attorney, or the community management services provider can proceed the matter legally.
State and Federal Law
State statutes allow the board to collect assessments and establish procedures the HOA and its community association management company must adhere to when collecting payments. Statutes such as condominium acts and civil codes of procedure are examples of statutes giving HOA's the authority to collect delinquent assessment fees. Federal laws and regulations such as the Federal Fair Debt Collection Practices Act and Federal Bankruptcy Code also apply to the collection of community assessment fees.
When the board creates a new policy for collecting payments, it should be sure the procedure is in keeping with state and federal law. An HOA management company can ensure this happens, and help the board execute the procedure according to the governing documents of the association, common law, state law, and federal law.
The Big Picture
Collecting delinquent assessment fees using legal action is a reality of HOA management, but the purpose of a collection policy is to prevent legal action as much as possible, while retaining the right to use it if necessary. Most communities have a collection policy that outlines a course of action benefitting the HOA. A consideration that should be investigated if not already in place includes a standard of procedure in place that benefits residents – an allowance for payment plans in the event of financial hardship.
Establishing a fee collection policy that considers the interest of the HOA and its residents demonstrating good stewardship towards the community. Although a board and its community management services provider have the authority to collect past due fees, making provisions for residents to bring late fees current within a reasonable time helps make legal action a last option, which is what whatever HOA board and community association management company wishes.