Community Association Management Services: Creating a Policy for Collecting Late Fees

It could happen to any managed community that lacks a good policy for collecting late assessment fees: a few residents are unable to pay their fees, and receive a grace period that is not enforced. Then the same thing happens with a few more residents, and then a few more. Before the HOA realizes it,…

It could happen to any managed community that lacks a good policy for collecting late assessment fees: a few residents are unable to pay their fees, and receive a grace period that is not enforced. Then the same thing happens with a few more residents, and then a few more. Before the HOA realizes it, the unpaid assessment fees leave a gaping hole in next year's budget; and the only way to correct the problem is to go after the fees aggressively, or have a community association management services provider do the same.

The “aggressive” collection of late fees is sometimes necessary, but it is always inconvenient. No board member enjoys playing the role of debt collector with someone who might be a neighbor, or likes to delegate the issue up the ladder to attorneys or HOA management companies. Yet, a lax policy for collecting late assessment fees inevitably sets these scenarios in motion.

The community must collect late fees in some way, or maintaining necessary cash flows for maintenance, security, and emergency funds will be impossible. However, the board can establish a collection policy that is firm, but fair that reduces the financial loss from defaults in assessment fees while remaining considering the financial situation of residents.

Creating such a policy requires the board to consult with its community association management services provider, or the attorney for the community if a management company is not retained. During the consultation, the following parts of the policy should be established.

  • Dates for the collection of assessment fees and the levying of late fees
  • Steps to be taken when a fee is late or delinquent
  • Allowance for payment plans due to financial hardship
  • Specification of when delinquent fees are pursued legally
  • Provision for collecting costs associated with collecting fees

These steps are painted in broad strokes, but the preferences of the board will fill in the details. If board members lack experience in implementing financial policies, they should consider retaining the services of HOA management companies. The board will certainly want an experienced legal entity to handle legal proceedings if they become necessary, so forming a relationship with a full-service HOA management provider is good planning.

Communities that lack a valid policy for collecting late assessment fees can only temporarily hide the problem. Sometimes, essential types of maintenance are put off due to a lack of funds, and the community starts to look “rough around the edges.” When this happens, property value starts to decline, and residents who remain in good standing with the community become upset. In the end, unclear assessment fees may even result in assessment fees being raised – a move that HOA management companies will help a community prevent.

When a fair policy for assessing and collecting late assessment fees is in place, none of the above situations has to happen. The HOA or its community association management services provider collects fees in an orderly, respectful manner that keeps the property owner informed at all times about the next course of action, should it become necessary.