How you handle arrears in your homeowner association can mean the difference between a place you love to call home and a community that is slowly deteriorating. Being an HOA Board member means that you have an obligation to collect assessment fees to keep the community afloat. Collections often pit neighbor against neighbor, so some Board members turn their head the other way until they find the association in a downward spiral or start dipping in the reserves. You never want these two situations to happen in the community you call home.
Neglected maintenance such as landscaping, pools, painting and other upkeep in the community erodes the value of homes in the community and makes it challenging to sell vacant units. Professional property managers and real estate agents caution that failure to maintain the common areas and exterior community appearance subjects the association to decline that is difficult and costly to overcome.
Here are some ways your Board can handle arrears and protect your association from future problems.
Promptness Counts. There is no perfect solution to dealing with a homeowner in arrears, but the faster that you act, the better the outcome. Talking to homeowners before they are months behind can help you get payment or at least a partial payment. It’s also important to create the “everyone treated equally” impression by explaining what happens or doesn’t happen in the community when owners are in arrears. While this may sound harsh, it creates the expectation that everyone is equal and must pay assessments.
Hire a professional. You volunteer to serve the community, but you may not be comfortable doing all the necessary jobs. Rely on pros for advice and collections. You can avoid the “neighbor against neighbor” scenario by engaging a professional to collect payment from overdue accounts. This takes you out of the situation, and you’re still upholding your responsibility to the community.
Levy a special assessment. Boards use special assessments to pay for major projects, but special assessments can be used to supplement operating expenses when the association is in financial stress. State law and association documents set the rules, so check those before you act. If there is no overriding rule, Boards can use a special assessments to bridge the gap between expenses and the dues they can collect. This isn’t popular with homeowners because it burden owners to cover their neighbors’ debts.
Sue or file a lien. When you can’t collect assessments, you owe it to the other homeowners and yourself to take the delinquent homeowner to court or file a lien. A suit can spur the irresponsible owner into action. The problem is that few defaulting homeowners have anything worth garnisheeing. Filing a lien can help your recover delinquent assessments when the property is sold, depending on your state laws.
Dipping In Reserves is Always Bad. Do not dip into your association’s reserve account because you’re making a bad situation worse. Some states forbid using reserve funds for the operating budget. Even if your state doesn’t ban this action, it’s a bad idea because it impedes long-term maintenance and replacement.