Boards of directors should develop a written policy and should abide by that policy to ensure that all owners are treated fairly and equally. The policy should recognize that it is best to take quick and decisive action on the collection of delinquent assessments. A good policy consists of sending at least two letters after the deadline for paying annual assessment. In the case of monthly assessments, the first letter should be sent after the first monthly assessment is not timely paid, and the second letter after the second month’s assessment is not timely paid. Of course, this policy will need to be tailored to the circumstances of a particular community association as each community association will have different amounts for assessments, payment dates, and other demands unique to the particular community association.

    After the second demand letter is sent and before the matter is referred to an attorney, board of directors of the community association should consider having a candid conversation with the owner and discuss that the community association will foreclose if necessary. If the delinquency is not corrected at this point, it is definitely time to place the delinquency in the hands of an attorney to handle.

    The policy should also include a schedule for filing a Notice of Lien with the Register of Deeds in the county in which the property is located. If the property is for sale or if it is in foreclosure, it is important to file a Notice of Lien in order to protect lien rights.

    News of tolerance for failing to pay assessments spreads rapidly and an isolated problem with collections can become systemic if the board of directors becomes too relaxed and owners believe that the community association will not enforce assessment delinquencies.

    An assessment collection policy should provide ample warning and notice before any delinquency is turned over to an attorney for collection. Remember, the owner will be responsible for paying for any professional services charged for collection and the owner will not be happy about paying an attorney to collect the assessments. Requiring the owner to pay a lawyer to draft a single letter on a matter that could be resolved without attorney involvement may create a contentious situation that could last for many years. Owners need to be reminded that attorney’s fees, interest, late fees, and costs will be sought in the event legal action becomes necessary. An owner who fully appreciates that a $350.00 delinquency can easily cost 10 times that amount in attorney’s fees is not likely to end up in litigation unless he or she is insolvent. Once an owner’s account becomes delinquent and goes through the litigation process, they are not likely to find themselves in that situation again unless they are experiencing serious financial difficulties.

    Many times assessments are not paid in protest to the board of directors of a community association or in opposition to its policies. In these situations, a dialogue between the owner and the board of directors is necessary. Although, personalities and history may make these situations difficult with the obstinate owner, it is most cost effective to try to resolve these disputes without litigation if possible.

    In addition to legal action to collect assessments, a community association may suspend common area enjoyment rights of an owner with an assessment delinquency. The community association may also deny services, such as architectural review of proposed structures.

    If necessary, consider installment plans from owners to collect on past due accounts. Installment plans should only be accepted when an owner has demonstrated financial difficulties. Prior to entering into an installment plan, the community association should file a notice of lien in the Register of Deeds office to protect the community association’s lien rights while installments are being made. Make sure that the installment plan is in writing in the form of a promissory note signed by the owner. The promissory note should specify that the total amount due will be immediately accelerated if the owner defaults on the agreement

    This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice. Seek a competent attorney for advice on any legal matter.