S.M. from Ohio writes:
Dear Mister Condo,
There are a lot of delinquency problems at my condo due to poor previous management company. My question is how to collect effectively.
Mister Condo replies:
S.M., regardless of how the previous management company performed, it is the owners that didn’t pay their common fees and assessments as they should have that created the delinquency problem. Delinquency is a serious problem for condo associations as it creates stress on the budget and often leads to the Board not having enough money on hand to conduct the association’s business and make timely contributions to the association’s Reserve Fund. It is also an unfair situation where the good-paying owners are forced to cover the expenses of the association that the non-paying owners are enjoying. The good news is that there are plenty of ways to remedy delinquency in condos and HOAs. Obviously, the first step is to have the new management company prepare accurate ledgers for the units in question. A good management company will do this as part of their everyday business service to the association but if the previous management company kept poor records, it might take an assist from the Board to get the ledgers accurate. The Board should adopt a Uniform Collection Policy and the management company should send out letters to the delinquent owners letting them know that the association is serious about collecting its money and that more serious actions are coming if the matter isn’t resolved in timely fashion. Hiring a specialized debt collection agency makes sense here because it is very likely that the units in your building have equity in them and a debt collector will get these unit owners to pay in short order. Letters of demand, liens, and even foreclosure actions are available to the association. Foreclosures will not likely be needed but they are an important tool for the association should any of these owners refuse to pay. Once the accounts are brought current, adherence to the Uniform Collection Policy should prevent this problem for surfacing again. All the best!