It’s not easy to deal with delinquent homeowners association dues. While every board hopes that residents in their community will pay their HOA fees on time, you cannot always guarantee it. In extreme situations, the board may need to call on a debt collection agency for HOA delinquency cases. HOA collection services can be very helpful if the board is unable to deal with unpaid HOA dues themselves. If you want the best results possible, here’s how to choose an HOA collection agency.
In this article:
What Can an HOA Collection Agency Do for Your Association?
When residents do not pay HOA dues for at least 3 months, they can be declared delinquent. These unpaid assessments essentially become the debt of HOA members. Since HOAs need money to maintain the community, the board will always try to collect the unpaid dues. However, not all boards have the time and resources to deal with HOA collections. Instead, they will hire an HOA collection agency to do the work for them.
There are many third-party companies that deal with homeowners association collections. The board will pass the delinquency cases to the agency; they will be the ones to contact the homeowners and urge them to pay their debts. If a delinquent homeowner decides to settle their debt due to the HOA collection agency’s efforts, the board will have to share a percentage of that amount to the company. The amount will depend on what was agreed upon in the contract.
What Are the Benefits of An HOA Collection Agency?
Hiring an HOA collection agency to deal with late, unpaid dues can be cost-effective for the association. Board members take on a lot of responsibilities to ensure that the community is maintained and functioning properly. The time they will spend on HOA collections can be better spent on more important community matters.
An HOA collection agency will be the one to personally visit delinquent homeowners, talk to them about their debt on the phone, and send them emails or letters to collect debts. So, even if the board doesn’t have time to collect, the HOA’s debt is not just sitting there. You have an agency that will actively collect unpaid HOA dues.
HOA collection agencies also have expertise when dealing with delinquent homeowners. They will know which strategies will be most effective in collecting the debt. The company will have safeguards such as thorough documentation to prevent potential lawsuits or legal trouble.
Debt recovery can also be more successful with an HOA collection agency. Once the debt has been passed to a third-party company, homeowners will know that the association is serious about collecting unpaid dues. Delinquent homeowners are also aware that their unpaid dues can significantly affect their credit score. So, once a collection agency contacts them, they may be more willing to come up with a payment plan.
How to Choose the Right HOA Collection Agency
Although you may not be held liable for any violations committed by an HOA collection agency, it’s still important to select a company that can collect late HOA dues without violating the rights of the homeowner or breaking any laws. Here are some tips on how to choose an HOA collection agency.
1. Ask for Referrals
Your HOA management company, as well as other associations, can be valuable resources when deciding which collection agency to use. Ask them for referrals, specifically ask for companies that they have already worked with and have been able to provide excellent results.
2. Do an Online Search
After you gather a list of potential collection agencies, conduct an online search for these companies. This will allow you to see if the company has been involved in any lawsuits or scandals. Check the search results for reviews — whether positive or negative — as well as news articles or reports that many show the HOA collection agency in a negative light.
3. Have a Thorough Vetting Process
Once you have narrowed down the list to one or two companies, make sure you have a thorough vetting process. This will help determine if they are the best collection agency for your community. Don’t hesitate to ask questions about their collection practices. You want a company that follows the Fair Debt Collection Practices Act. If you choose a company that engages in illegal or abusive tactics to collect the debt, the board may just end up in legal trouble.
4. Acquire Reports of Former Collections
You need to know how much the company is collecting from the homeowner above and beyond what is owed. It’s perfectly legal to request a report from the collection agency. They can edit out personal information. You just need to see their recent accounts with the amount owed and the amount collected. Beware of companies that show a huge difference between the two numbers. Also, don’t forget to check how they calculate fees and how they determine the association’s share.
5. Check for Hidden Fees
Hiring an HOA collection agency will cost money. If a company’s price seems too good to be true, it probably is. There’s a chance that they will have hidden fees that will hit when the HOA is least expecting it. It’s better to choose a company that is straightforward about all the costs involved. Always remember to inspect the contract for hidden fees and other questionable clauses before signing it.
6. Stick to a Local HOA Collection Agency
It’s possible to choose a collection agency that offers low rates, but make sure that the company is still local or in the same state. With a local company, the board will have an easier time monitoring their practices. If they see that homeowners are being harassed, they can easily contact the agency and provide feedback.
7. Always Put the Community First
Always remember that homeowners with delinquent accounts are still members of the community. Though the HOA should be treated seriously as any other business, these people that live alongside you. Whether or not the reasons behind the late payments are valid, you don’t want these homeowners to be harassed by a collection agency. This sometimes can be more ineffective. Make sure to choose an HOA collection agency that will treat your residents with respect.
Keep in Mind the Dignity of Residents When Choosing an HOA Collection Agency
When the time comes that you need to call on the aid of an HOA collection agency, it’s important to not hastily choose a company. It’s crucial to show your fiduciary duty to the community by spending the time and energy in selecting a debt collection agency. Above all, you need to ensure that they will be able to maintain the dignity of your residents. Doing this will uphold your obligations as a member of the board and strengthen the community.
If you want to deal with late dues but are hesitant to hire an HOA collection agency, you can opt for a remote management company like Clark Simson Miller. We can provide strategic, effective, and consistent collection services for your community.