Receiving a collection notice could end up being a surprise if you weren’t aware, you were in an HOA. The most frequent error found is, the owner didn’t provide their current mailing address to the Association. When escrow closes, the deed notifies everyone where documentation should be mailed. If the deed notes the previous address and the owner didn’t forward their mail, again, you won’t receive a Welcome Letter from your management company.

If you receive a collection notice, review the notice and call the collection agency that served the notice as management will no longer have access to your account. If there is a discrepancy, contact management after you’ve settled the account. They may research the account and either make error adjustments or schedule a hearing with the board of director’s to review and consider a proposed resolution.

The board of directors may adopt a Collection Policy. The policy will note the following:

• It will note the board’s authority to adopt the policy.

• The assessment due dates. This is typically 15-30 days.

• What the late fee amount is. This is typically $25-$50 and is paid directly to the association.

• Disclosure regarding the right to opt into a payment plan and how long that period is. This may be processed by the management company or the collection agent. The owner is given 30 days to respond to the “pre-collection” or "pre-lien" notice. It is imperative to respond to the notice before the 30 days passes. Ignoring this notice WILL result in the account being referred to collections.

• A copy of the collection fees must be included with the notice to show the fees that may be added to the delinquency. The fees could add up to over $2,000.00 even if the amount due is $150.00. I can’t stress enough how important it is to respond in writing to avoid these fees.

• A collection account is typically referred to the collection agent within 60 days.

• The collection agent will send an intent to lien if there is still no payment received. This is typically a 30-day period. When a lien is recorded against your home, you can’t sell the home or refinance a loan unless you pay the debt and this could slow that process.

• It will note what are recoverable costs such as the delinquent amount, late fees, interest, management and collection costs.

• If the collection agent is unable to get an owner response, the home may be foreclosed on so it's important to respond to a collection notice in writing.

• It will clarify what the payment agreement and allocations may be. It is typically within 3 months to 1 year.

• It may note legal costs that may be recovered by the association.

• It will note that the board must approve all write-offs of debt. The association may only collect assessments 9 months of assessments so the rest may be written off as bad debt. Since the Association is not for profit, this could affect the budget.

• An effective adoption date will be noted, and it will be signed by the board of directors.

Collection Policies may vary from one association to another; however, most of them are very similar to what was described above. This documentation is generally provided at or following the close of escrow.

To avoid collections take the following steps:

• Check with your Realtor or Lender to find out who your HOA Management Company is and confirm they have the correct contact information.

• Get the Association's website or email address and set up automatic payments or;

• Set up automatic payments through your banker.

• Login to your association’s account regularly to monitor the status of your account.

• Contact your management company for the address to mail paper checks. This is a slow process and it’s not recommended to choose this option as US mail is not guaranteed.

Take control and ownership for your finances by avoiding these very common mistakes. I hope this has been helpful.