Asking for money is uncomfortable at best, but asking your neighbors for delinquent dues can feel just plain awkward. Unfortunately, that may be one of your duties as an HOA board member. The HOA uses money from dues to pay for utilities, maintain the community and build the reserve fund. When members are not paying their dues, the additional expense of running the HOA falls on solvent members with the possibility of increased dues.
People become delinquent for a variety of reasons. Perhaps they feel the dues are too expensive, or they cannot afford the payment or they just forgot to make the payment in a timely manner. Regardless of the reasons, delinquency will happen. So what can you do about it?
Check your bylaws: Your association should have a delinquency policy to uniformly deal with members not paying their dues. Review your bylaws to make sure you can attempt to collect payment.
Consider imposing late fees: Late payments happen, but if there is no punishment for late payments, members will not be overly motivated to pay on time. Also, interest fees on delinquent balances can act as another deterrent.
Request payment: Send out demand letters requesting immediate payment. The letters should include the date the payment was due, the delinquent balance, any fees and interest accrued and a warning of future collection efforts. You could also propose a payment plan in the letter allowing the homeowner to repay the balance overtime if they cannot afford to pay the balance at once.
Send warning letters: If the late notice letter went ignored, you can send follow up letters outlining the consequences of prolonged delinquency. Your association delinquency policy may have a specific policy on how many letters to send before taking legal action.
File a lien: A lien is a claim against a property that ensures payment to the lien holder when the property is sold. If the property goes into foreclosure, the association may not receive payment from the bank if the mortgage is upside down.
File a lawsuit: If all of your previous collection efforts have failed, you can obtain a judicial order to garnish wages or money from other assets. HOA delinquencies do not show up on credit reports, unless the association is working with a collection agency, but court ordered debt will impact credit scores.
Before attempting to collect payments review your local laws. In Missouri, HOAs are covered under the Missouri Nonprofit Corporation Act. Collecting delinquent fees may be one of the most unpleasant aspects of board membership, but it benefits the HOA and ensures funds are available when needed.