Often boards struggle with the issue of when to turn over a delinquent owner to the association’s attorney to begin the legal process of collecting unpaid assessments.
A recent survey in our monthly e-newsletter indicated that 66% of associations responding wait until after 90 days to start the legal collection process, while 30% begin the process at 90 days or earlier.
What are the arguments for waiting? What are the arguments for starting the process as early as reasonably possible?
Arguments for waiting:
- Owner might pay if association (or management company) sends enough reminders and/or nasty letters.
- Association won’t spend as much on legal fees and will therefore have more money to spend elsewhere such as repairs, maintenance, insurance, etc.
Arguments for not waiting:
- As the saying goes, the early bird gets the worm. The sooner the attorney sends a demand letter the sooner the association will get paid. A formal demand letter from legal counsel shows the association is serious and will not be put off. Particularly in an economy such as we’re currently in most owners who don’t pay their assessment fees are frequently also not paying other obligations such as credit cards, car payments, loans, etc.
- Sometimes it’s the creditor who shouts the loudest and is the most aggressive in demanding payment who gets paid when there are multiple creditors looking to be paid.
What’s our experience?
We represent associations that turn over accounts any where from 31 days all the way up to 180 days. Our experience based upon 25 years of collecting assessments supports the position that as a general rule the earlier the association gets its attorney involved the sooner the association will get paid. Sounds self-serving right? Well, try this. Review your accounts receivable with your manager and attorney. Try to determine how many delinquent owners voluntarily pay (with no attorney involved) between 31 and 60 days, 61 and 90 days, 91 and 120 days and so on. If only a small percentage are paying in the 61 to 90 day range or the 90 and over range consider revising your mandatory collection policy so accounts are turned over to your attorney a month or even two months earlier. Give it a try and see if it makes a difference over a six month period. You might be pleasantly surprised.