Reviewing Your Association’s Collection Policies
Collection of a community’s assessments is critical to maintaining a steady flow of income to support the association’s maintenance responsibilities and maintain the association’s overall fiscal health. Yet with the more urgent day-to-day demands on property managers and volunteer board members, collections can often be neglected or completely overlooked.
On day one, new board members should evaluate the association’s accounts receivable aging report, its internal collections policy, and the governing documents. If delinquencies are rampant, it is possible that the collections policy may be inconsistently applied. If an association has recently decided to crack down on delinquencies, it must be sure to adopt a clear collections policy and share that collections policy with owners prior to implementation. The board will need to make sure that the collections strategy also includes a plan to combat recidivism, including acceleration or shortening the time for turnover of an account to collections. The board should also appoint either one person or a team to oversee collections, including the timing of sending late letters and turnover of accounts to your collections attorney. This person or representative of the team should provide a substantive report at each board meeting detailing their efforts.
So, when is it time for turnover? If the board has sent courtesy letters, and the owner has still made no effort to pay the outstanding balance, the next step is turnover to the Association’s collections attorney, right? Not necessarily. Turnover to a collections attorney should only occur if the board has a policy in place stating when and under what parameters an account would be turned over for collections to ensure all owners similarly situated are receiving the same treatment. Accounts can also be turned over on a case-by-case basis, but this can lead to inconsistent application of the collections policy and should be avoided.
The foundation of your collections attorney’s case will be the ledger provided. It should start with a zero balance so the attorney can be sure that the association has calculated interest correctly and all payments have been correctly applied. While open balance ledgers can be helpful to the board, your collections attorney will want a ledger that itemizes the charges and credits in chronological order. Beginning balances will need to be supplemented with older ledgers. The posting date of each charge should reflect the due date and not the date the assessment or charge was levied.
It’s important to be clear about the association’s goals with the attorney. The collections attorney has several tools available to compel an owner to be in compliance, but there is no one-size-fits-all approach. The more you know about each delinquent owner, the better the strategy session can be with the collections attorney.