Collecting Delinquent HOA Fees

Collecting Delinquent HOA Fees
by Takara Alexis

No one enjoys forcing payment plans, filing liens, or even foreclosing on their neighbor's house. But when homeowners do not pay their homeowners association fees, the rest of the neighbors have to pick up the slack through higher fees, special assessments, or reduced spending on community upkeep and amenities.

Just a few homeowners who stop making HOA fee payments can cut into an association's budget quickly. Annual HOA fees average $420 for single-family homes and $2,400 for condos, the U.S. Census Bureau says. If too many homeowners stop paying their HOA fees, lenders may be unwilling to make mortgages or refinance properties in the community. Fannie Mae, for example, can't guarantee loans in condominiums where more than 15% of the homeowners are 30 days or more overdue on HOA fees. That can hurt property values.

The sooner action is taken to collect past-due accounts, the better off everyone is. With 25 of the 200 units in foreclosure, the association waits only 60 days before telling delinquent owners that the HOA is going to place a lien against the title to their home. Consult your community association's attorney and read for yourself what the bylaws say you can do about delinquent homeowners. Weigh the costs of the actions your board could take.

Legal fees for letters demanding payment can run $200 to $500 per home, but each case is different. Suing a homeowner individually and trying to garnish wages to collect delinquent fees could cost $2,000 or more. Your community's attorney could be able to recommend a collection agency with experience working on HOA cases. Foreclosing on a homeowner who owes back dues can cost much more and will not result in payment unless the unit is worth more than the value of any mortgages and liens already on the property, plus attorney, home-sale, and court costs.

Offer a payment plan to owners in financial distress. Divvy up the delinquent amount into monthly installments. Many associations might try for a 12-month plan, but a six-month deadline with an option to renew seems to produce better results.

Many, but not all, states allow HOAs to sue homeowners for unpaid dues and then garnish the homeowner's wages or bank accounts. Taking a case all the way to trial could cost the HOA several thousand dollars. Having an HOA officer take the case to small claims court may be an option in your area.

Talk to your association's attorney about reverse foreclosure. Many communities in Florida are using a legal technique called reverse foreclosure to force banks to foreclose on unit owners who are making neither mortgage nor HOA fee payments. The move forces the bank to go ahead and foreclose on the unit. Once the bank owns the unit, it then has to make the HOA payments.