In the realm of community management, one of the pivotal aspects often overlooked until it becomes a pressing issue is the collections process. Community association board members serve as stewards of the community's financial well-being, necessitating a disciplined approach towards collections and delinquency management to maintain fiscal stability for the community association. This article delves into the significance of having a clear collections policy, outlines best practices for crafting one, and explores enforcement options to uphold financial integrity while adhering to legal frameworks.
The association’s authority to charge assessments to members and to engage in collections actions is specified in the association’s governing documents. A collections policy is adopted by board resolution. It serves to articulate in simple terms the expectations and consequences of non-payment so that homeowners understand what fees may be incurred or what action may be taken against them if they fail to make timely payments to the association.
With a collections policy in place, boards don’t have to take the time to evaluate each specific case. Rather, they can apply the process uniformly to all association members.
Even if your board has a general idea of what they’d like the policy to include, it is crucial to have a very specific policy in writing. With the help of professionals, boards can create a collections policy that is fair to members and complies with state and federal laws.
What good is a collections policy if there aren’t enforcement protocols in place? There are a few ways that boards can help encourage community members to pay on time. Sending reminders to owners who did not pay on time can be done as a courtesy; however, an effective policy will include timely escalation steps to avoid balances becoming too high.
Collections policies must always adhere to state and federal laws governing debt collection practices, lien procedures, and homeowner rights. Regular review and updates to the policy in response to legal changes or developments are essential to maintain compliance and mitigate legal risks. Board members should avoid making calls to past due owners as this exposes them to liability due to strict rules under the Fair Debt Collections Practices Act that governs collections agencies and prohibits other entities from carrying out such practices.
A clear and comprehensive collections policy is indispensable for HOAs to ensure financial stability, fairness, and effective management of delinquent payments. By following best practices in policy development and enforcing provisions within legal boundaries, HOAs can uphold their fiduciary responsibilities while fostering a thriving and harmonious community environment.
About Community Association Management Services
In business since 1991, CAMS is North and South Carolina’s premier community management company. With experienced local managers in each of its nine regions, CAMS provides innovative solutions to the community associations it serves. Additionally, CAMS was featured on Inc. Magazine’s 2022 Inc. 5000 list of the fastest-growing private companies in America. To learn more, visit www.camsmgt.com/choose-cams.