I am honored to have been asked to serve as a columnist for Community Newspapers to share important and topical information about South Florida community associations.
My column will specifically address business issues related to condominium and homeowner associations (HOA). Running an association is a complicated and difficult task, often thrust upon well-meaning residents who have volunteered their time to take on the enormous responsibilities of board membership. I also believe that nonboard member owners should understand the issues involved because they may decide to run for the board of directors one day.
Perhaps the most critical issue facing condos and HOA’s today is the delinquency rate among members paying their association maintenance fees, also known as assessments. Some people pay late, and some owners do not pay at all. Since condos and HOA’s are known as a zero dollar business (what they are budgeted to collect is the same as what they are budgeted to spend) it has caused either a reduction of services or even an increase in assessments. This unfairly affects the owners who have been responsibly paying fees and is a problem that should not be taken lightly.
So what is a community association to do when an owner is paying late or does not pay at all? Usually, the first reaction is for the association’s board of directors or management company to send the file to an attorney. Now while that may seem to be the best idea, and at some point in the life of a delinquent unit it may be necessary, it does not have to start that way.
The first thing that a board of directors needs to do is to plan a meeting with only one item on the agenda: collections. In this meeting, all options should be put on the table and discussed. The goal of this meeting is to agree to follow the association’s “uniform collection policy,” or to establish such a policy if one does not exist. The single most important paper in the room for this meeting is the governing documents of the association. Highlighted sections discuss how the bylaws address this issue. Every set of governing documents for all communities contemplate this issue and have parameters by which boards can deal with it. Such topics as when a payment is late, when it is past due, late interest, past due fees, and whether the association can file a lien for unpaid maintenance fees are usually included in the governing documents.
The second most important documents are Florida State Statutes 718 (for condos) and 720 (for homeowner associations). A good understanding of these statutes along with a proper reading of the associations own governing documents will give a board direction in formulating a just and proper uniform collection policy.
In my next column I will get down to the specific issues and present some possible policies that a condo or HOA may adopt to improve association cash flow.
Mitch Drimmer is a licensed community association manager and the Vice President of Association Financial Services, a Miami finance, business process outsourcing, and accredited collection agency specializing in community associations.