As any business owner will tell you, the lifeblood of a successful enterprise is sufficient capital. Similarly, if a co-op or condo building experiences too many delinquencies or payment delays, important capital repair and improvement projects can fall to the wayside.
“For anybody new to delinquencies, these are probably people who are struggling with a very tight economy,” says Melissa Nash, president of ARI, a full service receivables management company and a licensed collection agency based in West Palm Beach. “They are finding that the cost of living is greatly increasing, whether it’s your gas going up or your groceries going up, your light bill, and I’m not talking discretionary income, I’m talking hardcore cost of living. In a lot of these cases, people are seeing their income come down. A lot of people are struggling with the day-to-day cost of living.”
Unfortunately, this is not the case of individuals trying to skirt responsibilities; rather, many are experiencing tighter cash flow due to lingering recessionary effects. “I recommend that a board or association typically wait two months before initiating collection procedures. This gives someone that chance to make up the one missed payment with the next payment just in case they forgot or some other reason,” says Rachel E, Frydman, a managing member of The Frydman Law Group in Plantation. “But after the 60-day mark, if not current the association should proceed with collections. There should be a standard collection policy in place so that everyone is treated equally, and at the same time allow the law firm to work with the owners to get them on a reasonable payment plan.”
No board association wants to be charged as a “home-wrecker,” unfortunately, it is imperative that associations keep up-to-date with payments. “Grace periods vary from association to association. What we recommend and most boards follow is that delinquencies should be no more than 30 days and in some cases, 45,” says Nash. “Most boards have a written delinquency plan within their procedures, and their property management company or their accounting company will follow a late letter series. An example would be, let’s assume that an association has quarterly dues, and the last payment was due on April 1. So on April 15 they were late and they have a $25 dollar late fee that was charged when the letter was sent out. It will say you have until this amount of time to pay your bill and if you don’t, it will go to a third party for collection activity. In that period of time, the association has done two points of contact to try to collect before any additional late fees are incurred.”
Debt collection is actually a wholly separate enterprise that is best outsourced to professionals who are skilled in managing collection and foreclosure proceedings. “When boards work with residents who are delinquent without involving a third party they can find themselves in an unusual position,” says Nash. “They need to be very careful that they are not discriminating against other homeowners. You don’t want anyone to say ‘why do they get a monthly payment and I have to pay mine in full every quarter?’
“It is important that the property owner be proactive in reaching out to the association as early in the delinquency as possible to work out a payment plan over time,” adds Kaye. “Because assessments from associations in almost all instances can be a lien against the property and foreclosed upon by the association, the property owner should not ignore or put association notices on the bottom of the pile of bills for later reference. When owners make an effort and make reasonable payment proposals that will resolve their account over the course of several months, in our experience most boards are willing to work with them rather than pursue formal collections.”
Whichever path is selected, it is important that association boards collect the delinquent fees as quickly as possible, as one person’s actions can affect the entire community.