At some point, most boards will experience a homeowner not paying assessments. Sometimes it’s just one, and sometimes it’s several homeowners, but regardless, this can be an uncomfortable situation for the board. Even though the delinquent homeowners are your neighbors, making sure that all homeowners pay their assessments and taking action when they don’t is an important board responsibility. The association is a non-profit that depends on all homeowners paying their assessments timely. Otherwise, the association may not be able to meet its financial obligations. Even if your association is not experiencing any delinquencies right now, you may in the future, so be sure to bookmark this page and return to it again when you need it in the future.
Do you have a compliant Collection Policy?
If you have a homeowner in arrears, the first thing any board needs to do is confirm they have a Collection Policy that is compliant with current Colorado law. As of January 1, 2014, the vast majority of associations are required to have a Collection Policy that includes very specific information, which requires details about the application of payments and a payment plan offer, among other information. If your Collection Policy was drafted before mid-2013, it is probably not compliant with current law. If you think your Collection Policy is not compliant or are not sure, please contact our office.
Once you have a compliant policy, be sure to follow it. While some policies occasionally allow for deviations, such deviations should be the exception, not the norm. Additionally, some portions of the policy, like sending the payment plan offer letter, are hard and fast requirements and cannot be deviated from. If you do need to deviate from the policy for some reason, it is best to confirm with the association’s attorney that any deviation is legally permissible.
Some boards can also run into selective enforcement issues when they deviate from their policy, and we want to be sure to avoid that. This can happen even with the best of intentions. Here is an example: Two homeowners are both delinquent, and both come to the board asking for a reduction in late fees to pay the balance. One homeowner is nice, and the other shouts and tries to bully his way into a waiver. Does the board have any justification for agreeing to a waiver for one and not the other? What if one homeowner is elderly and on a fixed income, but the other is a two-wage earner family with a new car and a huge RV they travel in every weekend? Is your answer different in the second scenario? If in doubt, it is always best to reach out to the association’s attorney just to confirm that the board is not opening itself up to a selective enforcement claim.
One of the requirements of the Collection Policy is offering the homeowner a payment plan of at least 6 months to get caught up. If the homeowner agrees to the payment plan and then misses one of the payments or fails to also pay current assessments during the payment plan, you do not need to start over with the delinquency notices listed in the Collection Policy. You can simply move ahead to the next step in the Policy.
What other collection options are available?
Some association documents allow for additional collection options that might entice homeowners to pay their balance without the need to send them to the attorney for collections. For example, some association documents allow the association to deny access to amenities when a homeowner falls delinquent. If your association has a pool, this can be a great motivator to get a homeowner to pay their balance once kids are out of school and the temperatures heat up.
Other association documents allow for acceleration, which means the association calls due to all the future assessments due for the rest of the year. This can be useful if you have a homeowner that finds themselves delinquent over and over. In those cases, if you accelerate the full year’s assessments now, once the homeowner pays, at least they are paid in full through the year and won’t fall behind again until at least next year.
If all else fails, get the attorney involved to handle collections.
If you go through the Collection Policy process, use the appropriate collection options, offer the required payment plan, and the homeowner still doesn’t pay the balance, it’s time to get the attorney involved. At this point, the association has usually sent three or more letters to the homeowner with no resolution and it is likely that escalated action is needed to secure payment for the association. It is the board’s responsibility to attempt to collect from delinquent homeowners, and if the board’s efforts have not been successful, then legal collections is generally the next step. If you do send a homeowner to an attorney for collections, at the very minimum, the attorney will need a copy of the following documents:
- The required payment plan offer letter is sent to the homeowner;
- A ledger going back to the last time the balance due was paid in full and showing an itemization of all charges, credits, and payments since then;
- A copy of the association’s current Collection Policy.
However, any additional information the board or management company has is also often useful. For example, it can be helpful to have any contact information for the homeowner, like a phone number or copies of any communication history with the homeowner that indicates any reason for delinquency. All of this can be very useful for the attorney attempting to collect from the homeowner. Once the matter is sent to the attorney, they should make all reasonable efforts to collect the balance as well as keep the board and management company up to date on the status of any matters they are handling.
If you have any questions or concerns about the status of any collection matters or about collections in general, please feel free to contact any of our Altitude attorneys at 303-432-9999 or [email protected].