Unmasking the Blind Spot: HOAs and the Overlooked Delinquency Disaster

Homeowners Associations (HOAs) and condo boards of directors play a critical role in maintaining the integrity and harmony of residential communities. Their responsibilities range from ensuring aesthetic standards to organizing social events. One area where HOAs are often meticulous is disaster preparedness – they plan for hurricanes, earthquakes, floods, fires, and even unexpected disasters with detail. However, a less visible yet equally destructive disaster seems to escape the spotlight: delinquencies. In this article, we’ll delve into the intriguing paradox of how HOAs can be extensively prepared for natural disasters but lag in devising uniform collection policies for delinquencies.

Natural disasters are well-known for their capacity to wreak havoc and devastation, both physically and financially. HOAs are acutely aware of this and invest considerable time and resources in creating disaster preparedness plans. The recent fires in Hawaii obliterated entire communities. Florida is still reeling from Hurricane Ian; this list of natural disasters doesn’t scratch the surface. Most community associations understand the eventuality of these types of events and prepare.  These plans include emergency contact lists, evacuation procedures, and property protection strategies. The reason for such dedication is apparent: the urgency to safeguard lives and property is unquestionable.

The Unseen Delinquency Disaster

Delinquencies, while lacking the immediate visual impact of natural disasters, have their own insidious way of corroding the stability of a community. Delinquencies are unpaid HOA fees or assessments that accumulate over time. Unpaid dues can lead to a financial crisis within the HOA, restricting its ability to maintain communal facilities and services. The ripple effect can be considerable – reduced property values, deteriorating amenities, and, ironically, diminished disaster preparedness. Eventually, delinquencies also cause a cash shortfall in the reserves due to a lack of funding, making the community even more unprepared. 

Not addressing delinquencies is almost as dangerous as not preparing for a natural emergency. Furthermore, the association can act before a disaster strikes in the case of delinquencies. With fires, floods, earthquakes, and wind damage, a disaster must occur before you can act upon the plan.

So, why does the urgency to formulate a comprehensive collection policy for delinquencies often fall by the wayside? One key factor is the perceptible difference in immediacy. Natural disasters present a clear and present danger that demands immediate action. In contrast, the impact of delinquencies is gradual and often underestimated until it’s too late.

Overcoming the Paradox

Education and Awareness: HOAs must educate homeowners about the gravity of delinquencies and their consequences. This could involve transparent communication through newsletters, community meetings, and digital platforms.

An effective collection policy outlines clear expectations, consequences, and payment options. Timely communication with homeowners who fall behind on payments can prevent escalating situations. The collection policy should include provisions for payment plans, when the HOA will start acting to collect a debt, what actions the association will take such as amenity suspensions, voting restrictions, towing, and fob turn offs, how much is charged for the late fees and late interest, when the board will file a lien, how to address active military service member delinquencies, how much the HOA will charge for a returned check or non-sufficient funds, the delinquency checklist for moving forward with collections, and all other matters that may need some direction when an owner is delinquent.  

Mediation and Support: Understand that financial hardships can lead to delinquencies. HOAs should offer support and seek to work matters out with delinquent owners instead of sending them right to foreclosure, aiming to find mutually beneficial solutions. At Axela Technologies we believe that foreclosures should be the last desperate attempt to collect from a delinquent owner. Axela thinks “we should work it out instead of putting them out.”

Just as disaster preparedness plans have escalation procedures, associations should have a systematic approach to escalating delinquencies involving reminders, warnings, and legal steps if necessary.

Long-Term Financial Planning: HOAs should consider creating robust long-term financial plans that include contingencies for delinquencies. This can help ensure the association’s financial stability even in challenging times.

HOAs are fiduciaries of a community, charged with maintaining its well-being and ensuring its longevity. They have a  duty to prepare for all manner of catastrophic events. While natural disasters capture attention due to their dramatic impact, delinquencies operate silently. Yet, their long-term consequences can be equally destructive. It’s time for HOAs to shift their focus and invest the same level of urgency and preparedness in dealing with delinquencies as natural disasters. By implementing transparent communication, proactive policies, and empathetic support, HOAs can prevent the gradual erosion of their community’s foundation and ensure its resilience in the face of all types of disasters.

Get a template for your Uniform Collection Policy, notice a meeting, have a Uniform Collection Policy discussion on the agenda, and work out your action plan for when a unit goes delinquent at the meeting. 


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