The “Ungated” blog from the Community Associations Institute, which is the leading organization representing the interests of communities with associations, is among the best sources that the industry has to offer for timely information and advice on association topics. Its post from Aug. 25, which is titled “Communication counts: Developing a collections policy for community assessments,” bears particular mention for its specific suggestions that have been proven to be highly effective for associations seeking to collect delinquent debts from unit owners.
The article focuses on the importance for associations to have a uniform collections policy, which helps to ensure that all owners receive equal treatment. It states that effective collections policies will typically have timelines for owners to make payments prior to the matter being referred to an attorney for legal action.
The article provides the following general framework for one example of an effective policy:
- If an owner is 15 days delinquent, a first-notice letter will be sent by the board or community manager.
- If there’s no response within 45 days, a second delinquency letter will be sent. This is a good time to double check for an up-to-date email or address for the owner.
- If 60 days elapse, and there’s no response, the policy may note that the matter will be turned over to an association attorney, who will send a demand letter. The next step may be recording a lien or, filing a lawsuit against the owner — or as a last resort, foreclosing on the property.
CAI’s blog post concludes with input from a Michigan attorney who indicates that the speed and seriousness of the process are vital for effective collections of past-due accounts. It also notes that collections policies must comply with the requirements of community governing documents, state statutes, and the Fair Debt Collection Practices Act.
Effective collections policies and strategies by community associations are essential for their financial and administrative wellbeing. While this recent CAI blog post provides one example of an effective policy, community association directors should consider consulting with their legal counsel to evaluate whether a more aggressive policy is feasible and in keeping with the provisions of their association’s governing documents as well as applicable Florida law.
Florida associations are currently confronted with various factors that may result in increased assessment default rates among their memberships. These often include the raising of their budgets due to increased insurance costs coupled with the upcoming new inspections and reserves requirements, which will likely result in increases to maintenance costs and higher interest rates that could impose strains on the costs of financing and owning real estate.
As a result, associations should protect against potential increases in assessment defaults by ensuring that their collections policies and procedures are as effective as possible. By working with highly qualified and experienced attorneys who focus on association collections, condominium and HOA communities can develop and implement highly effective policies and tactics to keep owners’ arrears to a minimum.
To read this and other important articles for associations, visit CAI’s Ungated blog at www.blog.caionline.org, and we encourage all association directors, members and property managers to enter their names and emails in the subscription box in the blog to automatically receive all of the organization’s future posts.