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HOA/COA: Steps to Collect from Non-Paying Unit Owners

Introduction

Like an ordinary business, HOA’s depend on monthly dues and special assessments to operate. In order to operate in harmony, each owner shall pay its fair share. However, often times owners either fail to pay because they can’t or they have an issue with the association, whether right or wrong. When 1 or 2 owners don’t pay their monthly dues, it can be easy to let is slide. But is that good precedent for other owners? It is important for HOA’s to have a procedure in place for late paying owners.

HOA Scenario

HOA’s require monthly dues be paid by the 10th of every month. When they are not paid timely, the property management company assesses a late fee which usually start at $25. The theory behind the late fee is to deter continued late payments. Unfortunately, the late payers are usually repeat offenders with multiple excuses. But what happens when a unit owner fails to pay its dues? 1 month, 2 months, 3 months… When should an HOA take action and stop falling for excuses.

Collection Procedure

It is critical that the HOA board and/or its property management company have a set procedure in place regarding dues. It is important that all unit owners be treated equally in regards to payments. For example, if monthly dues are $300, the HOA may set a $600 dollar limit (or 2 months) before taking action. Within 10 days of the account accruing to $600, the Board or management company issue its demand letter in accordance with the condominium documents. If the owner fails to respond timely, send an email or make a phone call. If no response within a reasonable period of time, possibly 3-5 days, file a lien on the property.

In Louisiana HOA liens are only valid for a certain period of time. However, most HOA agrees to file the lien and a lawsuit to enforce the lien close in time. While HOA are hesitant to incur costs on non-paying owners, it is critical to treat all unit owners the same. In addition, it is the Board’s obligation to act in the best interest of the association. Emotions aside, if a unit owner is not contributing their share, it is not fair to fellow unit owners.

Collection Summary:

In summary, HOA should have a procedure in place for the following actions:

1. Set an amount allowable before taking action;

2. If Unit Owner is beyond amount, issue a demand letter;

3. If the demand letter is not responded to timely, issue an email or phone call and wait an additional 3-5 days for a response;

4. If no response, file a lien on the property and a corresponding lawsuit to enforce the lien

Should you have any questions or you would like to discuss this issue in further detail, please do not hesitate to contact us to schedule a free consultation.

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