Collecting late fees can be a difficult issue for both the HOA board and HOA members. Tempting as it is to put it off, collecting late HOA fees and delinquent HOA dues are just good fiscal policy – so is having an HOA late fee policy in place.
Why Collecting Late Fees Is Good HOA Collections Policy
The main responsibility of an HOA is the maintenance and enhancement of the community. It’s an important legal fiduciary duty for the HOA board. It’s also one that requires a steady amount of money to do as well. It’s fair to say that HOA fees fuel everything that the HOA does. Thus, collecting HOA fees, and collecting them in a timely manner, is the only way your HOA can do its job.
HOA boards have different approaches when it comes to collecting HOA dues. Regardless of the size of your HOA or the capabilities of your HOA board, however, one thing is certain. A clear and consistent HOA collections policy is crucial.
HOA collections policy, in this case, is not just a matter of having collection schedules in place. Your policy should also set up a proper dialog with your HOA members about the fees you collect. This way, you can prepare residents on what to expect when their fees are due. Also, you have a few options when it comes to ensuring the timely payment of fees. One of these options is the consistent enforcement of late fees.
By getting into the habit of consistently collecting late fees, you help your residents be responsible for paying dues on time. In the long run, you are also helping your board and your treasurer to hit your collection goals, too.
What Happens When HOA Fees Are Late
When fees come in late, the first obvious effect is a drop in collections. Your HOA board could miss its target. However, what is not immediately obvious is the amount of work required to recoup those HOA late fees.
The HOA board has a fiduciary responsibility to collect late fees. It’s not a simple matter of just letting these late fees go uncollected. Thus, an HOA will take the time and effort to collect delinquent HOA dues.
Oftentimes, collecting these dues requires the help of a lot of people. These people will need to be paid, too, so the extra work of collecting HOA late fees end up costing the HOA money.
You’ll need a bookkeeper to keep track of late HOA dues as well as a collection agent to follow through. These services alone can already cost an HOA around $80 an hour in salaries. Then, you’ll need a compliance officer and secretary to manage your collections, too. Also, if an attorney gets involved in the matter, that’s at least $300 an hour that the HOA pays just to collect late fees.
When you add those up, an HOA late fee policy suddenly does not look as imposing. These late fees do more than just remind delinquent members of their tardiness. It also helps recoup some of the hidden costs of collecting HOA fees.
Implementing an HOA Late Fee Policy
That said, HOAs can’t just set their late fees however they like. There are also state governing laws and bylaws to consider when setting up an HOA late fee policy. It’s a really important area for HOAs to consider. So, the HOA board will need to check their late fee policy and ensure that they are compliant with state law.
Some states have now laws that cover HOA late fees. If you’re in Florida, for example, then your HOA board needs to base its late fee policy on its governing documents. It’s a similar case in Nevada, where late fees need to be covered by the HOA governing documents as well.
In most cases, these common rules apply when implementing an HOA late fee policy.
1. No Late Fees During a Specified Grace Period
With few exceptions, there’s a due date and a grace period after the due date for every HOA fee. Some state and bylaws give as little as ten days, while some extend for as long as 20. Whichever the case, no late fees should be assessed during this period.
In most cases, however, this grace period is meant to give time for a check to get cleared in the bank. So, if you’re a homeowner and your check clears a day after the due date, it’s still a late payment. However, in this case, you may still be in the grace period and thus exempt from a late fee.
On the other hand, your payment as a member will still be late if it clears after the due date. So, it does not matter if you sent the check out ahead of time. Thus, it is still the responsibility of HOA members to pay their dues ahead of time.
2. HOAs Can Waive Late Fees
However, It’s important for HOAs to be consistent when they waive late fees. HOAs can give their members a late fee removal process if they see the need for it. Thus, they can have a policy ‘forgive’ all late fees due when certain conditions are met – usually with a one-time waiver fee.
However, it’s important for the HOA to be fair when it comes to waiving late fees. Otherwise, they are sending the wrong message to their members when it comes to their dues.
Consider a Dues Payment Plan
HOA members can face financial challenges, just like everyone. Compounding late fees can get complicated real quick. So, if you’re looking to help out your delinquent HOA members, consider a dues payment plan.
In many cases, these plans can allow members to pay past dues with ongoing partial payments. More importantly, they don’t allow the continuous compounding of late fees, as long as the homeowner abides by the payment plan. It makes things much easier for everyone involved.
Get the Right Help With Collecting Late Fees
When it comes to collecting late fees, the HOA board can always count on help. When it comes to legal advice and collection services, you can always count on a trusted national HOA services directory to point you in the right direction.