“COLLECTING DUES IN TOUGH ECONOMIC TIMES”

First, the Association needs to have a clear and firm collection policy. A community association is a business. Even though it is likely a non-profit organization, it has bills to pay. If the association’s members don’t know a specific date by which payment is due, it is unlikely that payment will be received in time for the association to pay those bills. To encourage timely payment, non-payment by the required date must be attached to very real, disclosed consequences. Normally, this means late fees. While it would be nice to think that association members pay their dues on time because they value what their association does for them, and they want to make sure the association’s contractors and bills get paid on time, the reality is that more people pay on or just before the “deadline” for avoiding late fees. If that deadline doesn’t exist, or if there is no consequence to paying after the scheduled payment date, experience says that the payments won’t be received. Similarly, the consequences should not be easily reversed, or they represent no consequence at all.

 

The results of non-payment need to be meaningful. If you don’t pay a credit card bill on time, your interest rate might climb significantly. You will also pay a late fee, and your credit score might drop. These consequences make people prioritize paying credit card bills on time. Fears of foreclosure and repossession help owners prioritize mortgage and auto loan payments. Without a meaningful consequence flowing from the non-payment or untimely payment, association dues will always fall to the bottom of the payment priority list. What is meaningful in terms of dollar amount and percentage rate will vary from community to community, and frequently deed restrictions and condominium declarations establish amounts and rates in advance. Where a Board can really make a difference, is making sure it acts on delinquencies by filing liens or lawsuits to protect the Association’s right to collect, and affirmatively work to turn receivables into cash.

 

A recurring debate exists regarding whether an association is better served by filing liens or filing lawsuits when members become delinquent in their obligations. That discussion is better saved for a later article, but suffice it to say that, once a Board adopts one policy or the other (or a blend, as I would recommend!), that policy should be followed with few exceptions. To avoid harshness that should not be necessary in running a community association, Boards should be flexible in allowing members to enter into payment plans, especially in associations that collect dues on an annual basis. Communities that collect dues monthly may have a more difficult time structuring payment plans, but if the member is willing to make a bona fide proposal in good faith that results in dues being paid in a reasonable period of time, everyone benefits from a workout that avoids expensive and time consuming legal processes.

 

Association assessments, like taxes, should be paid by everyone. No one’s dues should be artificially high, just to cover for the people who don’t pay. The ability of a community association to keep dues at a fair amount, and to actually collect from the highest percentage of owners possible, will be enhanced even in a bad economy, by (i) having and implementing a serious collection plan, (ii) having meaningful consequences that flow from non-payment, and (iii) by taking appropriate legal actions that force payment or protect the association’s ultimate right to collect from people who don’t make payment or reasonable payment arrangements.

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