An ounce of prevention: Collection policies for small HOAs

Late payers and delinquencies are a particular risk for our small communities.

Suppose a few owners in a 250 unit condominium fall behind in their HOA assessments. It's a problem that their association must manage, but it will probably not affect the community's ability to pay their bills. Since small HOAs have fewer members to pay community expenses, the association can run out of funds with just a few problem payers.   

For small HOAs, the most crucial element of financial stability is a clear, enforceable collection policy to prevent delinquent assessment payments.

Three reasons we make this a priority for our communities:

-Rules without enforcement: If your HOA doesn't have a late payment policy and means to enforce it, the community has no way to fix the problem if it comes up. Without clear rules and enforcement, you may have a 'right to enforce', but not a means to do so. Why don't we?(link to 'Vague bylaws')

-Ability to pay bills: With a small number of owners, the association could run out of funds to meet their financial obligations like insurance, maintenance, and management if only one or two are delinquent. Since small HOAs have fewer members to pay community expenses, this is a critical component of a healthy HOA.

-Your neighbor's delinquent dues can derail your condo sale. Keeping HOA fees current is more important than ever because of some recent changes in mortgage lending standards for condominiums. Now no more than 15% of units may be 60 days or more past due on HOA fees before the community is kicked out of Fannie Mae lending eligibility. This is important to your owner's ability to easily sell their homes.

The phrase "an ounce of prevention is worth a pound of cure" means the small step of adopting a collection policy now will prevent having to invest a much larger amount later to resolve payment problems. Without one, it can be a long and costly process to deal with late and non-payments by owners.

Read more about collection policies in this article in Common Ground from the leading national HOA group, Community Associations Institute:

https://lsc-pagepro.mydigitalpublication.com/publication/?m=20613&i=781804&p=16&ver=html5

Learn more about how we help our volunteer boards implement payment policies, and the steps that MicroHOA will take to protect on-time HOA fee payments. Contact MicroHOA at info@microhoa.com.