In this introduction to community association collections, we will cover the basics of why and how associations collect assessments (also known as “dues”) from homeowners.
Authority to Collect Dues
Associations get their authority to charge and collect dues from state law as well as from the governing documents for the association. Associations are responsible for the maintenance and repair of all common areas in an association (such as roads, parking lots, pools, clubhouses, elevators, etc.). In order to pay for that work, associations are empowered to collect dues from homeowners who live in each community.
There are rules about how an association proposes and adopts an annual budget. You know that annual meeting notice you get in the mail every year? That meeting is where the Board of Directors for your association proposes the budget for the upcoming operating year. Boards are generally very open to receiving feedback from owners about the proposed budget, so if you have comments or questions for your Board, be sure to attend that meeting and speak up! Most associations have provisions in their governing documents (and in state law) that say that a proposed budget is automatically adopted unless a certain percentage of the homeowners vote against it.
What Happens When Owners Don’t Pay
Most homeowners do not understand the ramifications of failing to pay their dues. Associations have many different options when it comes to collecting delinquent assessments; the particular choices available to your association are outlined in your Declaration and the state law under which your association is formed.
The obligation to pay association dues is both a personal obligation and an obligation that is tied to your property. That means that an association can hold you personally liable for unpaid assessments AND they have options with regard to your property for collection of the debt. For example, most associations have the authority to record a lien against your property. Since liens are a public record, they may appear on your credit report. A lien can also prevent the sale of your property in the future, since it has to be “satisfied” (paid off) in order for a sale to take place.
Many associations have further authority, including the ability to file a lawsuit to foreclose the association’s lien on your property. Homeowners are often surprised to learn that an association can foreclose on their home, because they think only mortgage lenders have that authority. Because of that mistaken belief, they may not take their debt to their association as seriously as they would if they knew that failing to pay could ultimately cause them to lose their home.
Some associations have the authority to collect a security deposit from a delinquent homeowner (usually in the amount of three months’ dues). Other collection options that are available to association include termination of utilities, acceleration of assessments (requiring pre-payment of a full years’ dues), personal lawsuits, and non-judicial foreclosure. We’ll discuss each of these many options in depth in the future.
What You Need to Know About Community Association Collections
What homeowners should take away from reading this article is that the obligation to pay dues is legally binding and should be taken seriously. You can lose your home otherwise. It is better to stay in communication with your board of directors about your account if you fall behind. Propose a payment plan and be honest about your financial situation in order to minimize your delinquency and the possibility of legal action being taken against you.
Board members and other readers should understand that if you have a serious delinquency problem in your association, you may have many options available to you to address that problem. Consult with an experienced community association lawyer in order to understand your options. Also, consider adopting and abiding by uniform policies that address what happens when a homeowner starts to fall behind. Adopting and enforcing a Collection Policy can help you reduce delinquencies and address them early, before they get out of hand.
Thank you for reading! If you have any questions we can answer, please feel free to leave a comment or contact us directly.