A unit has gone delinquent in your community association. The manager sends out a courtesy letter, gently reminding the owner to make their payment. The manager did the right thing, but no response is received and no payment made. The board is incensed — and now they’re out for blood. The account is sent to the association’s attorney. The attorney files a lien, eventually the unit is foreclosed upon. The board has the title — and their satisfaction; but at what cost? Regarding HOA Collections, there is a better alternative to foreclosure is a collections solution
In this example, the board of directors chose the most draconian possible response, but they stand to gain very little from it. The association will get a limited title, good for maybe a few months of rental revenue. That might not even be enough to offset the legal fees, much less the costs to clean, rehabilitate, and list the unit. Worse still, the decision to immediately pursue an association foreclose could have a negative impact on the community, creating a rift between the board and other owners.
Community association collections should be just that: collections. While the legal option should always remain on the table, it should be reserved for the most extreme cases. In this example the board and management did nothing wrong, but was it the optimal strategy?
The question needs to be asked: what does the board really want? Are they looking for a solution to a problem, or to punish the person who started it? If it is the former, their heart is in the right place. If it is the latter, then your association might have a bigger problem than delinquencies. An HOA collections solution may be the alternative you need to consider.
It’s only normal to want to right a wrong, but justice is not the purview of a condo board of directors. The board exists to administer the association and the only motives they should have are guaranteeing safety and improving property values. If they are more interested in punitive measures than cost effective ones, you might have to question their judgement in other matters as well. The goal here is for the HOA to recover delinquent assessments.
There was a time when foreclosure was the only option, so you can’t really fault people for defaulting to that tactic. Fortunately, developments in the industry are providing community associations and their managers with flexible, reliable, and frankly more cost-effective solutions. In recent years, companies that specialize in HOA and condo collections have been causing a shift in the market.
These aren’t back office boiler rooms or call centers. They are nimble firms who take a different approach to the collections process. They employ specialists with mediation and customer service training. They develop technologies specifically designed for the task at hand. Above all, they understand community associations: their rules, regulations, and the challenges faced by the people who live and work in them.
Frankly, foreclosing on someone’s home is a serious decision and doesn’t yield consistent results. If your motivation is making the association whole, consider a solution designed from the ground up to do exactly that. An effective collections solution is a better alternative to foreclosure is a collections solution
Mitch Drimmer is a respected thought leader in his field and has led numerous continuing education classes in collections, His articles have been published in key trade journals and newspapers, and he is a speaker at educational seminars. Drimmer is also a former board member of the Florida Community Association Professionals (FCAP) and earned his company the distinguished FCAP Reader’s Choice Award for collections four years in a row. Throughout his career, Drimmer has worked with community associations to help them see their way through tough times, especially during the real estate crash. He is a passionate advocate for community associations and has participated in the legislative process over the years trying to bring fair and equitable legislation that serves community associations.
Drimmer earned a BA in History from Hunter College and served as CEO of Drimmer Industries, Inc. in New York City for 35 years.