As every manager knows, collecting everyone’s fees is crucial to an HOA’s success. Every homeowner in your association agreed to pay the fees when they moved in. (Hint: most HOAs have better luck collecting payments online as opposed to checks.) But each and every month, every HOA in existence deals with late payments. There are always people who pay late, or not at all. But not only do those habitual late payers create cash flow problems for the whole association, but the hassle creates extra work for you and your board.
So, What Do You Do About It?
If late payments are caused by the struggle of a job loss or other situation, a written payment plan might be in order (but that’s another article). Thankfully though, most delinquent homeowners simply need the right motivation to pay on time.
The legal side of the HOA collections issue is widely discussed in various articles and publications. However, there seems to be less discussion about the practical side of this issue. That is to say, short of public shaming or hasty legal action, how do you actually motivate people to pay by the due date?
As you’ve probably seen first-hand, the typical nasty notes and threats of collection aren’t always effective, so it might be time to think outside the box.
No Payment, No Parking?
Think of any amenity the association charges extra for; things that aren’t expressly spelled out in offering documents. This could include parking, storage areas, the fitness center, tennis courts, party room, etc. Your HOA could establish a policy requiring a signed lease agreement to use these facilities. Create your lease agreement carefully, ensuring that it states the lease will be terminated for non-payment of monthly dues. With this in place, you could prevent delinquent homeowners from using those leased amenities if they don’t pay their HOA fees.
For example, say you have storage bins that you don’t currently charge an additional fee for. Especially if you have more homeowners than storage bins, you could require every homeowner who wants a bin to enter into a lease agreement to use them. The lease should spell out that non-payment of HOA fees results in that lease being revoked. That way, late payers will have to pay their fees on time to continue using the storage. The threat of losing out on an amenity they like because of late payments might be enough motivation to keep people paying by the due date.
This tactic can be really effective for preventing late payments. In fact, one homeowner never paid his monthly dues until he actually received legal papers. But when he got a letter stating that his key fob to the fitness center would be deactivated, he paid up and was never late again.
Just Hit the Right Nerve
It’s funny what a little motivation will do when it’s focused on the right thing! Some people might not care much about the storage bins or fitness center, but they might not be able to live without parking. Any amenities that you can charge extra for, and revoke access to, are good candidates for this type of policy. If your association doesn’t have access controls, this is a good reason to install them. You might make up the cost of the new locks in just a few months of collected, unpaid fees.
Using amenities to improve HOA dues collections requires some follow-through on your part. After all, if you’re going to make the threat, you have to back it up with action. This type of policy is most effective when amenity access is revoked immediately after notification of a late payment. But once a policy like this is known to homeowners, you might find yourself with a lot more on-time payments.
- Environmental Consciousness in Your HOA - July 18, 2019
- “Pay Up Or Else!” — Motivating the Habitual Late Payer - January 9, 2019
- Common Amenities — Make Them Pay for Themselves! - January 26, 2017
Help
I think it’s sad that you so lightly ridicule a member of the community.
Hi Shelly. Thanks for your comment. I’m guessing you’re talking about this: “In fact, one homeowner never paid his monthly dues until he actually received legal papers. But when he got a letter stating that his key fob to the fitness center would be deactivated, he paid up and was never late again.”
I can see how you might interpret it that way, but I honestly don’t think that she intended to ridicule at all. I think she was just pointing out the irony that different people are motivated by different things.
Late payers are a problem, but we simply had an attorney author a template letter that we use to file a lien on the property for non-payers. We only collect dues once a year between Jan 1 – Mar 1. After that the payment is late which kicks in a late fee and after 1 month being late we file a lien. It only cost us $350 for the attorney’s letter and it only cost $15 to file with the county. In the first year, we receive all delinquent dues and enough late fees to cover all of the actions. We publicized widely what we were doing so people knew we were serious. Our objective is to deter the offense from occurring. If we have any in the future we will update the template and file it. At that point it will only cost the filing fees. I don’t have time to track people down and beg for money. They either pay me now or they pay me much more later.
Hi Cindy, I really like your approach. You’ve adopted a clear policy that everyone is well aware of. As long as this is enforced consistently I think that it would work for most communities.
I wonder if in some communities might also benefit from a well-documented payment hardship clause to consistently accommodate those who fall on hard times.
The parking idea is creative.