Every HOA's number one priority is the legal fiduciary responsibility to enhance and maintain their property. The only way to do that is by collecting HOA fees. That's why a clear collection policy is a must-have for your HOA board.
Sounds like fun, right? Maybe not. However, it's important to communicate a detailed collection plan for HOA fees. By managing homeowner expectations about fees and the need for timely payment, you can help your board (and especially your treasurer) meet their goals and reduce the need for costly fee collection.
Collecting HOA Fees is Critical
The importance of collecting fees cannot be overstated. In fact, an important duty of the board treasurer is receiving and depositing monies. HOA fees are the bread and butter of your association and enable you to maintain and enhance your property.
Imagine trying to keep the water on, pay insurance, and fund necessary upkeep without having the necessary fees collected. Collecting timely fees is so important that it's one of the reasons California courts recognized the need and right for HOAs to do so.
Fees are needed to fund two separate accounts. One is for operating funds covering regular expenses (such as PG&E, maintenance, water, and insurance), and the other is the reserve fund for unforeseen expenditures and planning for future repairs and replacements (such as roofs, painting, and paving). Members need to know about these funds and how they're used. They must also recognize the only way to keep these accounts solvent is by collecting fees.
All homeowners have a duty to pay HOA fees, whether it’s monthly dues or a special assessment. Keep homeowners apprised of their fees and what will happen if they don't pay their HOA fees on time.
Paying HOA Fees On Time Benefits Everyone
When fees are late, it starts a series of collection activities that require time, effort, and money - all precious resources that could be better spent elsewhere. When homeowners know the benefits of paying fees on time, like saving money and having projects completed according to plan, they’re more likely to do so.
Look at this list of sample costs to hire experts to collect delinquent HOA fees:
- Attorney: $300/hour
- Bookkeeper: $39/hour
- Project Manager: $80/hour
- Full-time secretary: $18/hour
- Compliance Officer: $25/hour
- Collection Agent: $40/hour
- Answering Service: $12/hour
That can be a real budget-breaker for your HOA. Make sure owners know their HOA fees stay low when all owners pay their fees on time.
Communicating an Effective HOA Fees Collection Policy Saves Time and Money...and it’s the Law
Sometimes board meetings can get heated when the issue of tackling non-payment of HOA fees arises. Some board members will know the owner involved. Some may want to admonish the tardy payer. While others may think being accommodating is the way to go. Having a clear collection policy in place can stop heated discussions before they start.
The Davis-Stirling Act states that all HOAs must have a collection policy for HOA fees that must be delivered prior to the start of the HOA’s fiscal year and include the following:
- The association’s policy for payment plans of HOA fees
- How late charges and interest are imposed with a specific schedule of fines
- Collection policies and procedures
- How the HOA will enforce lien rights or other legal remedies for collection of fees
- The owner’s right to dispute the delinquency of fees, have an internal dispute resolution, and/or request an alternative dispute resolution.
Davis-Stirling provides an example of a HOA fees collection timeline you can use to develop your own.
Sending Friendly Reminders When HOA Fees are Due Helps Owners
Text notices. We’ve all received appointment reminders, bank alerts, and other reminders via text. Why not consider using this same technology to alert owners about upcoming HOA fees?
Monthly Newsletter Reminders. Increase the urgency of payment by including details of expenses in the coming month.
Inform owners immediately if fees must increase because of unforeseen expenditures or need for special assessments. This will help your owners prepare their own budgets accordingly.
Giving Appreciation Motivates Owners to Pay HOA Fees On Time...Again and Again
People do more of what they’re appreciated for. A friendly thank you note to on-time payers of HOA fees helps ensure more on-time payments in the future.
Need help with your collection policy? An HOA manager can be a great asset to your board by helping to put a strategy in place so you won’t have to collect overdue HOA fees in the first place.