Handling delinquent dues payments is sticky enough in normal times, but what should an HOA or community association board or property manager do during the COVID-19 crisis? Residents may be unemployed, have been forced to take drastic salary cuts, or are facing other financial issues. Do you enforce the “hardship provision” rules or let payment slide until times are better? Here are some tips from BJM – Bach, James, Mansour & Company for dealing with delinquent dues and HOA finances during the coronavirus pandemic. Please note that we’re approaching this from a financial standpoint. You should also review plans with your experienced HOA attorney.
Be Prepared – Hone Your Budget
Dues and assessments are your HOA’s primary revenue stream. Deferring dues for any length of time can hinder the HOA’s current cash flow and future finances. Think about postponing short-term initiatives, or reducing some expenses in order to give your HOA financial flexibility. An entrance gate still has to be fixed, but maybe a construction project can be postponed. If vendor contracts are up for renewal, seek competitive bids. Look closely at your budget to see if you can temporarily adjust any expenses. Once you have a clearer financial picture, the board and property manager can better address how to deal with coronavirus-related delinquent dues.
Find a Middle Ground
You don’t want to completely suspend or defer dues payments during this time, nor should you immediately file lawsuits. Find a middle ground. Meet with homeowners individually (remember social distancing!) and set a payment schedule specific to each case. It’s better to get something over time, even if it’s just a small amount, vs. completely deferring payments and postponing the problem. If your bylaws specify payment periods, consider a longer repayment timetable than normal for these special cases. You may also want to forgive soft costs, such as interest or late fees on delinquent dues. Every concession can greatly help an unemployed homeowner.
Review your general plan with your attorney, then respond to each resident’s request for resolution quickly and firmly. Remind residents about their contractual obligation to pay their HOA dues and that the money supports their community. Keep interactions and conversations professional – don’t gossip about it at the board meeting (or on Zoom).
Restrict Access to HOA Amenities
Depending on current and previous delinquency challenges, consider restricting a delinquent resident’s access to amenities, especially if they don’t meet their payment obligations. As fitness centers, clubhouses, and tennis courts begin to reopen, you may want to limit use to late-paying homeowners. Being denied access to the pool, once open, might motivate a homeowner to prioritize payment to the HOA vs. non-essential expenses.
Should You Put a Lien on the Resident’s House?
One of the more common tactics for handling delinquent HOA dues is putting a lien on the resident’s home. This ensures the HOA recoups its money if/when the home sells. Don’t eliminate this tactic during the pandemic. After reviewing options with your attorney, discuss it in your meetings with homeowners and make sure they understand the process.
Maintaining a normal flow of dues payments – as much as possible – during the coronavirus crisis is critical to the financial success of every HOA and community association. Boards and property managers will need to be empathetic to special homeowner circumstances while still keeping these businesses afloat. If you have additional questions about cash flow, budgetary belt tightening, or dues collection, please don’t hesitate to reach out. You can contact the BJM team at (678) 551-2900 or via our contact page.
~ Neal Bach, CPA