By William Gonzalez Jr. / Published September 2017
Of all the challenges homeowner associations encounter, one of the most polarizing is how to effectively address existing or potential accounts receivable issues. Unlike financial institutions collecting on past due loans or utility companies threatening disconnection of service for nonpayment, homeowner associations do not maintain the luxury of distance between the debtor and the entity owed the obligation. Homeowners who choose to serve as board members often find themselves in the precarious position of having to render a decision of what serves the best interest of an individual homeowner versus that of the entire community. These decisions can pit neighbor against neighbor, thereby disrupting the quiet enjoyment homeowners seek and are lawfully entitled to.
Akin to a well-built house, the fiscal health of an association lies within its foundation. This foundation is built and maintained through education and action on the part of homeowners and the board members who serve their associations. Whereas homeowners may only view their annual dues as another debt to pay, they should be educated on the true purpose of their assessments and what the implications are in their failure to do so, both on themselves and the community. As for board members, they must understand and comprehend that above all, their fiduciary responsibility is to advocate for the needs of their community and enforce the guidelines as outlined in the association’s covenants, conditions, and restrictions as well as its bylaws in a fair and impartial manner. The role of a board member should never be perceived or executed in a fashion to serve one’s personal agenda. When these parties work in harmony with each other, a successful and financially sound association will prove to be the reward.
It is not uncommon for associations to experience accounts receivable issues of varying degrees despite having a dedicated board of directors and homeowners who’ve been educated on their responsibilities as property owners within an association-controlled community. As a matter of fact, associations often cite poor collection efforts or lack of proper direction on behalf of the engaged management company as a basis for terminating their relationship with one company and moving to another. The ultimate question for an association then becomes, “How do we effectively address the issue in the most cost-effective manner to yield the best results?” Numerous times, existing and potential clients have walked through our office doors and asked this very same question. The response issued is simple in nature yet is a proven method of success. The direction provided has always been to employ an aggressive but fair, formal collection procedure that is consistently applied and not subject to frequent amendments by the board of directors. Once adopted by the board, the collection procedures should be formally published to all homeowners so they are made fully aware of the repercussions of untimely or missed payments. Thereafter, the process will effectively address the issue with little involvement required by the board of directors, assuming the procedures themselves are properly executed by the management company or third-party collection agency engaged by the association. Simple and effective.
As a case in point, just over a year ago, we had a potential client with significant accounts receivable issue seeking our management services. The main reason offered to us as to why they were soliciting the services of a new company was that their delinquencies were rising with no end in sight and little hope for recovery. Not only could they no longer focus on the capital improvements they had budgeted for, but they would soon find themselves in the problematic position of having challenges related to the payments for their critical expenses such as landscaping, security, and pool maintenance. When asked what our recommendation would be in helping their community resolve this issue, our response was the same as provided to all our other clients…the simple and effective implementation and execution of a formal collection procedure. After detailing the steps involved with the collection process, our staffing capabilities to effectively manage the process, the fees associated with same, and how every homeowner is subject to this impartial approach, it did not take the board long thereafter to retain our services. As of today, the board’s attention is properly focused on determining which capital improvements they wish to initiate given the significant cash infusion their community has realized, which is a direct byproduct of reducing their account receivables by nearly 70 percent from the date the association retained our services.
The successful and cost-effective application of a formal collection process is contingent upon consistency and early intervention. One of the biggest concerns raised is regarding the right time to initiate a specific sequence of collection letters or calls that will yield the best results without being viewed as unreasonable by homeowners and board members alike. A good rule-of-thumb for this concern is to employ a decision-making process that compares the obligation of association dues to that of utilities or a car note. Would your utilities company shut off service the day after your due date without payment being received? Would the creditor of a car note seek to repossess your vehicle if your payment is not received within five days after the due date? Not likely. However, you should expect to receive some form of late notice advising of the past due balance; perhaps accompanied with additional interest and/or late charges. Now let us say you were 30 days late with either creditor. Is it safe to assume that you would probably expect some action to be taken against you for being that late? Perhaps so. If these scenarios hold true for these types of debt, truly responsible association boards should ask themselves…“Why should association dues be treated any differently?”
William Gonzalez Jr.
Collections Manager for Titan Management
William Gonzalez Jr., the Collections Manager for Titan Management, brings more than 16 years of experience in mortgage & homeowner association default servicing. His expertise in the areas of collections, loss mitigation, foreclosure, bankruptcy, litigation, and portfolio analytics has allowed him to effectively educate and service Titan clients with true ‘best practices’ expertise tailored to their specific needs. The results he and his team deliver are critical assets to the superior service that Titan Management provides to its family of clients. For more information, call (407) 705-2190 or visit www.titanhoa.com.