Collection Policies

Question: Our HOA is self managed. We have one owner who is significantly behind in payments and seems unable or unwilling to come current. Our bylaws allow us to use legal means to collect but our question is how do we begin? What type of lawyer would handle this and how does it go?

Answer: The board should enact a formal Collection Policy outlining how these things are handled. There is a sample in the Policy Samples section of The Collection Policy should include using an attorney to collect the debt if efforts by the board are ineffective. You should only use an attorney that specializes in HOA law and this kind of collection. Collections are often difficult for self managed HOAs since collecting money from neighbors is no fun. HOAs, regardless of size, should consider using an HOA management company to handle at least finances and collections.

Collecting HOA Delinquencies by Richard Thompson

There are few things more basic to a homeowners association than the fees it takes to keep the place running. When one or more owners default in the payment of fees, the impact is felt by all. And the longer the delinquency, the deeper the cut. It is a situation that many boards dread because of having to deal with neighbors. Here are a number of ways to reduce the impact of, cure or avoid collection problems in your community:

Establish a collection policy with teeth. While this sounds simple enough, many HOAs have nothing more in place than the often inadequate provisions of the governing documents. The collection policy needs to be clear and concise. Some of the basic provisions should include:

  1. Date the fee is due
  2. Date it’s late
  3. Penalty for late payments
  4. How late payments will be applied to outstanding balances
  5. Legal procedures that may be invoked after a certain period or level of delinquency is reached
  6. Who pays collection costs
  7. Lien filing rights on an owner’s property if payment is not received and,
  8. Foreclosure provisions.

The goal of the well written collection policy is to move the HOA’s bill to the top of the payment pile. As with any policy enacted by the board:

Apply the policy consistently. Once the policy is agreed upon, do not deviate from it. While there are great excuses still to be heard, the board has a fiduciary duty to protect the HOA’s rights. If one owner doesn’t pay, other owners have to ante up the difference or services will need to be curtailed. The board must absolutely avoid selective enforcement due to a friend’s, family member’s or a personal default.

Apply the policy in its entirety. The typical collection policy is made up of a series of sequential events that are triggered by time and/or dollar amount. Once put into motion, allow it to run its course. This typically ends in placing a lien on a member’s property. Garnishing wages, seizing property and foreclosure are possible but usually not invoked unless the case is extreme.

Let’s face it, collections are an unpleasant but necessary part of homeowners association living. Rather than reacting or overreacting, prepare for them with a strong yet fair policy. If the members know the will of the board, most won’t tempt the process.

Question: Is it acceptable to take a delinquent owner to Small Claims Court?

Answer: While state laws may vary, the board usually can use Small Claims Court to collect money. However, there are many practical reasons not to. The board typically has the right to place liens on owner property, garnish wages and other strong collection methods without going to Small Claims Court. If the Collection Policy is written correctly, collection and legal costs can be recovered from the debtor. Small Claims Court is limited to the amount that can be collected and may disallow other legitimate charges (like interest, late fees, attorney fees), the judge may rule in the defendant’s favor or split the difference. And even if the HOA wins, there is still a judgment which may require an attorney to collect if the delinquent still refuses to pay it. So, there is simply no advantage to the HOA using Small Claims Court.

To protect the HOA’s collection rights, it’s advisable to work with an attorney that specializes in HOA collections. Some collect their legal fees only when the balance is paid in full (HOA is paid first).

Used with permission from Richard Thompson of

Sample HOA Delinquent Collection Policy

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