Collection of your 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, your collections policy may be inconsistently applied. If you’ve recently decided to crack down on delinquencies, be sure to adopt a clear collections policy and share that collections policy with owners prior to implementation. You’ll want to make sure your collections strategy also includes a plan to combat recidivism, including acceleration or shortening the time for turnover of an account to collections. You’ll want to 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.
Let’s talk turnover. So, you’ve sent your courtesy letters, and the owner has made no effort to pay the outstanding balance. Your next step is turnover to your 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 your 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 you have 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.
Be clear about your goals. Your collections attorney has several tools available to compel your owners’ compliance, but there is no one-size-fits-all approach. The more you know about your delinquent owners, the better your strategy session with your collections attorney.