Making a List and Checking it Twice
It’s that time of year again when Boards are planning for the New Year. One of the tasks on their list should be to make sure the Association has enacted the mandatory governance policies and that each policy is being consistently implemented.
Every Association should carefully review its collection policy and ensure it is adhering to its provisions. Most collection policies establish the procedures an Association must follow should a homeowner’s account become delinquent. This can include timing and amounts for late fees and interest, timeframes for collection notices, and guidance as to turning over delinquent accounts to the Association’s attorney for collections. While these timeframes vary from policy to policy, an Association should consistently and timely abide by these timeframes to make sure it maximizes its ability to collect assessments and protect against potential claims by homeowners. As discussed by Molly Foley-Healy in a previous blog, Boards have a fiduciary duty to collect assessments, and the failure to collect delinquencies can have major consequences for a community as a whole.
One way Associations can maximize the collection of assessments is by timely turning over delinquent accounts to its attorney for collections. While an Association may have its reasons for not turning an account over to its attorney, such as believing that an owner may eventually pay if the Association sends several collection notices on its own or that it will save money on attorneys’ fees by waiting to turn over a file, the Association should keep in mind that the failure to timely turn over collections matters can decrease the ability of the Association to ultimately collect, costing the Association more money in the long run and jeopardizing the fiscal health of the community.
Don’t end up on the naughty list this year - become familiar and comply with your Association’s governance policies. Have a Happy New Year!