Late HOA payments are one of the most common problems homeowners associations face today. With assessments playing a critical role in the continuous operation of the HOA, it is imperative to know how to collect these late payments.

How to Deal with Late HOA Payments

It is not that difficult to understand how an HOA works. Homeowners who live in the HOA community contribute monthly payments or dues. The association then uses the collected payments to fund various HOA activities, maintenance, and repairs.

But, what happens if you don’t pay HOA dues? There are a number of possible consequences you might experience because of late HOA payments. In some cases, an HOA may even use the law against you. If you want to know what your specific HOA can do about overdue dues, though, it is important to refer to both your state laws and HOA governing documents.

How to Collect Delinquent HOA Dues

HOA dues are the lifeblood of any homeowners association. Therefore, it is essential for the HOA board to get a handle on overdue HOA payments to avoid running into funding issues. Here are some of the best ways to collect late HOA payments from homeowners:

1. Send Out Reminders and Provide a Grace Period

Although paying dues is a regular part of HOA living, many homeowners still forget to settle them on time. The HOA board should send out timely reminders before a fee is due.

It is a good idea to post this reminder on bulletin boards as well as your HOA’s website or social media pages if your HOA has them. The HOA should also send the notice via email, SMS, or newsletters.

If a homeowner is already late on their payments, the board should send them a delinquent HOA dues letter informing them of the overdue fees. This way, the homeowner can’t claim that they didn’t know about the delinquency.

It is also common for HOAs to offer a grace period for monthly dues. This is to allow for some breathing room and time for checks to clear in the bank.

2. Offer a Payment Plan

Homeowners can fall on hard times and start to struggle financially. If that happens, the HOA board can offer the homeowner a payment plan. Payment plans vary from association to association, so it is best to check your governing documents for the right provisions to follow. Keep in mind, though, that payment plans are usually not permanent. It is a temporary solution to a temporary problem.

3. Suspend Member Rights

Some associations have the authority to suspend the rights of homeowners when they fail to settle their balance. Florida Statute 720, for instance, gives associations this right. Rights that HOAs can temporarily revoke include voting rights and the right to use the association’s amenities. It is best to consult your HOA attorney first, though, before deciding to follow this path.

From a Fellow Homeowner’s Perspective

It can be difficult to imagine an HOA operating smoothly when other homeowners are not paying their dues on time or are defaulting on them altogether. As a member of your HOA, you naturally want the best for your community. Unfortunately, there is not much you can do to make your neighbors settle their delinquent homeowners association dues.

Increased HOA dues are another point of concern for homeowners when there are delinquencies. Because of the lack of funds, the HOA might charge special assessments or raise the current dues to make up for the loss. Although you can express your worries about the issue, all you can really do is trust that the HOA board will do its job right.

You also have no way of learning which of your neighbors specifically is delinquent, and the HOA board can’t disclose that information. Even if you somehow find out who is late on their payments, taking any action against them can be regarded as harassment.

Setting Up an HOA Late Fee Policy

The idea of having to pay a late fee on top of the monthly dues is sometimes enough to scare homeowners straight. When crafting a policy for charging HOA late fees, though, HOAs must consider the following:

1. Account for the Grace Period

If your HOA has a grace period, don’t forget to take it into account. Although payment is considered late the day after the deadline, most HOAs don’t charge a late fee until a day after the grace period ends. The HOA board must check its governing documents and state laws to verify when it is right to apply the late fee.

2. Check State Laws

Every state has its own set of rules when it comes to late HOA fees, though some states don’t have them at all. The HOA board must refer to state and local laws to ensure it does not run into legal trouble.

For instance, California has a law specifying how much an HOA can charge in late fees. Unless the HOA’s governing documents indicate a lesser amount, the late fee should not go over $10 or 10 percent of the delinquent amount, whichever is greater. The same law states that HOA dues are only considered delinquent 15 days after the due date.

Another area where state laws have a say is how to apply the payments for late dues and fees. In Florida, if a homeowner failed to settle their January dues but pays in February, the HOA will apply the February payment to January. That means the homeowner still has an outstanding February balance and a late fee for January on top of the late fee for February. If the homeowner pays in March, the payment will first apply to the January late fee, and whatever is left will apply to the February dues.

3. Communicate the Policy

An HOA that has a late fee policy should know how to effectively communicate it to its members. If the policy is new, the HOA board should make sure it disseminates the information using all available channels. It is also a good idea to include a copy of the late fee policy in notices and reminders.

Liens, Lawsuits, and Foreclosures: Worst Case Scenario

What happens if you don’t pay homeowners association fees? Apart from charging late fees and suspending member rights, the HOA can also take legal action against you. The HOA board can choose to file a lawsuit and take you to small claims court. Other possible remedies include filing a lien on your property and foreclosing on that lien.

When the HOA files a lien on your property or unit, you will have a hard time selling it. If you do manage to sell the house, you may wonder, “Who is responsible for past due HOA fees?” Although state laws differ, in most cases, the owner of the property will shoulder the responsibility of settling the fees. That means either you or the new owner will pay for it, depending on what you agree upon.

An HOA can also decide to foreclose on your property after placing a lien on it. Although these routes are admittedly more extreme, they do happen, quite often even.

The Best Course of Action

Some homeowners want to learn how to get out of paying HOA dues. The bad news is that there is no way around it. You agree to pay your share of the dues the moment you signed into the association. Provided the HOA followed its governing documents, it is best to just pay the dues and avoid late HOA payments. After all, you are benefiting from the HOA’s amenities and services.

Keeping track of delinquent homeowner accounts can come as a challenge without the proper tools. Use Condo Manager’s integrated HOA and condo association management software today. Schedule a free demo, call us at (800) 626-1267, or contact us online for more information.

RELATED ARTICLES:

• Your Ultimate Guide to HOA Fees
• HOA Management Fee: Are They Charging You Right?
• HOA Accrual Accounting: Why It’s The Best For HOAs

HOA fees — they are a staple in any given homeowners association. But, what are they exactly? And what purpose do they serve?

What Are HOA Fees?

What is an HOA fee? Also known as HOA dues, HOA fees are fees that homeowners associations collect from its members, i.e. homeowners. When homeowners purchase a property within the HOA community, they agree to a set of covenants and rules set forth by the association. This includes paying HOA fees.

While HOA fees are paid regularly, the exact frequency depends on the association. Some HOAs have an annual payment setup, while others use a quarterly structure. More often than not, though, HOAs charge fees on a monthly basis.

What Do HOA Fees Cover?

Homeowners associations require funding in order to operate smoothly and continuously. But, not all HOAs are created equal. As such, the services HOA fees cover can vary from HOA to HOA. Typically, though, you can expect your homeowners association dues to cover the following:

• Maintenance and Repairs. Common areas and shared spaces require regular maintenance and the occasional repair work. In order to keep the community looking great and functioning well, a portion of the HOA fees should be allocated to maintenance and repairs.
• Landscaping. Beautiful landscaping can have a significant impact on curb appeal. When curb appeal is high, property values tend to follow.
• Insurance. Every HOA requires appropriate insurance coverage for various liabilities.
• Amenities and Services. Living in an HOA community grants you access to members-only amenities such as swimming pools, private parks, clubhouses, playgrounds, and fitness centers. HOA fees also usually cover services such as trash removal, snow removal, and security services.
• Reserve Fund Contributions. All HOAs need a reserve fund, which is set aside for future replacements, emergencies, and unexpected expenses.

If you want to know what HOA fees cover, it is imperative to ask the association you intend to join. Therefore, make it a part of your routine to ask for a copy of the HOA’s governing documents, especially the CC&Rs. These documents will contain specific information on restrictions and coverages.

How to Calculate HOA Fees

The process of calculating how much to charge homeowners in HOA fees is relatively simple. The HOA board is responsible for determining the amount after planning the annual budget.

They go over what the HOA expects to incur in costs for the upcoming year. This includes maintenance and repair services, insurance, utilities, landscaping, wages, and other vendor services. They also make sure to allocate enough money to maintain the right reserve fund level.

After arriving at the total anticipated expenses, they will then divide this by the number of homeowners in the community. This is the amount each homeowner must pay for the year. If the HOA collects on a monthly basis, the amount is further divided by 12. Keep in mind that board members are not exempt from paying HOA dues.

It is worth noting that not all HOAs divide the total expenses equally. Some homeowners may need to pay a larger fee depending on the size of their property. As always, it is best to check your HOA’s governing documents for confirmation.

How Much Are HOA Fees?

While there is no blanket answer to this question, average HOA fees can give you a rough estimate of how much you should set aside. HOA average costs can change depending on your location and the type of community you live in as well as what amenities and services your HOA provides. It could extend anywhere from $100 to $1,000. On average, though, HOA fees tend to play between the $200 to $300 range.

Why Are HOA Fees Too High?

There are a few factors that can influence how much an HOA charges homeowners in monthly dues. A high delinquency rate, for instance, can tip the scales.

If there are too many homeowners not paying their dues on time, the HOA board might raise the fees in order to make up for the loss and stay solvent. Emergencies can also cause homeowner association fees to rise.

Sometimes, though, expensive HOA fees are a sign of poor financial management. It could indicate that the HOA is paying too much for services or is in a bad contract with a vendor. There have even been a handful of fraud cases involving HOA funds.

It is essential for the HOA board to remain transparent when it comes to financial activities. The board should always present the annual budget and financial statements to homeowners. This way, homeowners know where their money is going.

If you want to review your association’s financials, you can usually request a copy from the HOA board. After all, homeowners have a right to review the HOA’s financial records. Should the HOA board refuse to comply with a reasonable request, the homeowner can take legal action.

Low HOA Dues Can Be Equally Bad

On the other hand, having low HOA dues is not necessarily a good sign either. When fees are too low, it could mean that the association is skimping on essential maintenance and services. In doing so, it fails to provide homeowners with adequate common areas and amenities.

You might not immediately feel the effects of subpar maintenance. But, over time, you will start to notice things around your community not working properly. Furthermore, poor maintenance can affect curb appeal and bring down property values along with it.

Charging HOA fees that are too low can also give way to surprise costs. With a lack of funding, the HOA will be forced to levy special assessments when unexpected expenses crop up. And nobody wants to pay extra for something that should have been covered by the HOA fees from the beginning.

What Happens If You Don’t Pay HOA Fees?

Some homeowners might not want to pay HOA fees for whatever reason. When that happens, the HOA has multiple recourse options. Provided state laws and the HOA’s governing documents allow it, these options include but are not limited to the following:

• Late Fees. The HOA board can charge late fees when a homeowner misses a deadline for paying association dues.
• Suspension of Rights. Delinquent members may have their rights revoked until they settle their balance. This includes the right to use community amenities and the right to vote.
• Small Claims Court. With the help of an HOA attorney, the board can choose to take the delinquent homeowner to a small claims court to force the member to pay.
• Lien. Placing a lien on the homeowner’s property usually happens in more serious cases, but it remains a possibility even for smaller debts.
• Foreclosure. When the homeowner still refuses to pay their overdue HOA fees (plus any late fees), the HOA can foreclose on the lien and seize your property. Foreclosures can also affect your credit score.

How to Get Out of Paying HOA Dues

Homeowners agree to abide by the covenants and rules of the HOA when they purchase their property. Part of that is consenting to the payment of regular HOA fees.

By now, you already know that there are certain consequences of refusing to pay HOA dues. You could even lose your home. If you are struggling financially, consider talking to your HOA board and asking them to set up a payment plan that works for you. But, unless you want to face the repercussions of defaulting on your dues, it is best to continue paying them.

A Symbiotic Relationship

Living in an HOA community offers many benefits. These benefits, though, come with a price — HOA fees. Sometimes, people only rebel against something because they don’t understand it. Now that you know what HOA fees are for, you can think of it as quid pro quo. Your HOA provides you with value in the form of maintenance, services, and amenities in exchange for your diligent payments.

Collecting HOA fees can be a hassle if you lack the proper tools. With HOA management software from Condo Manager, you can streamline processes with ease. Schedule a free demo, call us at (800) 626-1267, or contact us online for more information.

RELATED ARTICLES:

• HOA Management Fee: Are They Charging You Right?
• 7 Reasons Why You Should Use A Property Management Accounting Software
• 4 HOA Financial Reporting Mistakes To Look Out For