If you're serving on your homeowner’s association (HOA) board, you've probably found yourself wondering: What do we do when someone just... stops paying their dues? That’s where a solid collections policy comes into play.
A collections policy is a formal set of guidelines that tells your board when and how to respond to delinquent assessments. Think of it as a financial map for navigating those “off-course” scenarios fairly and consistently. When well-written, it keeps things clear, impartial, and drama-free—just the way we like it!
1. What Is Allowed by Our Collections Policy?
Great question. Before taking any action, always start by checking your governing documents, CC&Rs, bylaws, and applicable rules and regulations. These documents, together with state and federal laws, outline what your board can and can’t do when it comes to collections.
You’ll also find helpful info on both owner and board rights, as well as guidance on enforcement timelines and procedures. Don’t worry; no law degree is needed! But if you’re unsure, your association’s attorney can help interpret the fine print.
2. Make Sure Owners Actually Know About the Policy
Let’s face it: people can’t follow rules they don’t know exist. The more transparent and accessible your collections policy is, the more likely owners are to comply with it.
Here are a few simple ways to spread the word:
- Post the policy on your community website.
- Email it directly to homeowners.
- Include it in your community newsletter or post it on a bulletin board.
When owners are well-informed, misunderstandings are minimized—and that’s a win for everyone.
3. Keep It Clear and Well-Defined
If your policy is written in legalese thicker than the humidity in July, it’s time for a rewrite. A great collections policy is one that owners can actually understand.
Make sure it includes:
- The purpose (it exists to protect everyone’s pocketbook by ensuring all owners pay their share).
- The process (step-by-step overview of what happens when someone is late and the penalties that will be incurred).
- Legal requirements (like timeframes and notice rules)
Clarity isn’t just kind—it’s smart governance.
4. Impartiality Is Key
We know that community association boards often walk a fine line between being neighborly stewards and enforcing necessary regulations. That’s why having a clear collections policy is crucial. It helps you act consistently, removes ambiguity, and reinforces your fiduciary duty to treat all owners fairly and equitably. It’s not personal, it’s simply the policy!
Bonus: A strong policy saves you time! Instead of debating how to handle each case individually, you’ll have a pre-defined process to follow. It also prevents favoritism, because no one wants to be accused of going easier on their pickleball buddy.
5. So... How do We Enforce the Policy?
Good news: you’ve got options! Enforcement doesn’t have to mean jumping straight to legal action. Start with these gentle but effective strategies:
- Friendly reminders: Email notices or letters can be surprisingly effective.
- Late fees and interest: These serve as nudges that it's time to catch up.
- Liens: In both North and South Carolina, liens are a legal way to secure payment, which is also a requirement in many covenants – to ‘perfect’ the association’s claim. The lien will attach to the property and can lead to foreclosure if not resolved (though that’s always a last resort).
- Privilege suspension: If permitted by your governing documents, you may be able to temporarily suspend access to amenities or voting rights for owners who are delinquent.
The key is to match the response to the situation and always follow your policy.
6. Consider Offering Payment Plans
Life happens. People fall behind. Offering a reasonable payment plan can keep things friendly and financially responsible at the same time.
Before offering one, make sure:
- You’re allowed to do so (check those governing docs again).
- You define the plan clearly: include installment amounts, a timeline, and what happens if the owner defaults.
- You include a termination clause, so there’s no confusion if things don’t work out.
- Monitor compliance with the terms of the agreement to uphold accountability.
Payment plans should make economic sense wherever possible; however, they should also protect the interests of the association. The best practice is generally to require full payment within a year at most.
This approach encourages goodwill and can reduce the likelihood of costly legal action.
7. Don’t Set It and Forget It
Your collections policy isn’t a crockpot—don’t just set it and walk away. Regular reviews are essential to ensure your policy remains relevant to your community.
Here’s what to look at:
- Are communication and notification methods still effective?
- Do your payment methods and timelines align with current trends (think: online payments, mobile apps, etc.)?
- Are any legal updates needed?
When in doubt, check in with your community manager or association attorney. They’re there to help you stay on track.
Final Thoughts
Handling delinquent accounts is never fun, but with a clear, well-communicated, and fairly enforced collections policy, it doesn’t have to be a nightmare either. It’s about striking a balance between protecting your community’s financial health and treating owners with respect and fairness.
And remember, at CAMS, we’re always here to help you navigate the ins and outs of HOA governance with confidence. So, take a deep breath, review your documents, and know that you’ve got this!
About Community Association Management Services
In business since 1991, CAMS has grown to become North and South Carolina’s premier community management company. With experienced local managers in each of its nine regions, CAMS provides innovative solutions to the community associations it serves. To learn more, visit www.camsmgt.com/choose-cams.
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