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.

Tina Larsson

Tina Larsson

Tina Larsson is the CEO of The Folson Group, which she co-founded in 2014 after three years of engagement with one co-op which during that time saved $430,000. The Folson Group is a New York-based financial consultant specializing in cost efficiencies. The company helps boards and managing agents cut costs so that they can keep fees from escalating. Ms. Larsson has over 22 years of investment and research analyst experience in the financial services industry. She co-founded her own independent investment advisory firm in 2007, following a long career as a portfolio manager and research analyst at Horizon Asset Management, Inc., an independent portfolio manager and provider of proprietary research. Ms. Larsson has been published in multiple subscription-based investment research products, as well as various media publications. Ms. Larsson has a BBA and MBA, both from Pace University.
Tina Larsson

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