Homeowners agree to the association’s covenants when they buy a home in an HOA, including dues and assessments. However, as with any system that requires people to pay, some homeowners will miss their payment deadlines. But, not all folks behind on their payments are intentionally ducking their obligations. Some are responsible homeowners who’ve found themselves in financial trouble, and they may need a little help to get back on track.
In most states, an HOA board has the authority to immediately file a lien and foreclose on a delinquent homeowner’s property. Is jumping to legal recourse at the first sign of trouble the best option for an association, or is there another way that could be a win-win? The HOA could offer a payment plan rather than threatening homelessness or assessing late fees to a homeowner who is already struggling. Setting up a payment plan is the most favorable solution for the HOA and the homeowners, but are they recommended? As with many other issues of an HOA, payment plans do have pros and cons.
The Pros of an HOA Payment Plan
HOA payment plans provide associations with a non-disruptive and practical way for indebted homeowners to settle delinquent accounts. It allows homeowners to make manageable payments without fear of accumulating more late fees or worrying about liens. Offering payment plans is advantageous to the association because, while it’s not the total amount, it’s still money coming in, which is better than receiving nothing at all.
The Cons of an HOA Payment Plan
Payment plans come with the risk of trust. Not all homeowners are interested in catching up on payments and would instead use a payment plan as a chance to abuse the system. There will be those who always promise to pay “the next time around.” Associations must create a protection plan if they are considering a payment plan.
Your board may be discussing whether to offer payment plans to delinquent homeowners, or your state laws might already require such provisions. If your state and local laws remain neutral on the issue, your governing documents are the next place to look.
If your governing documents do not have any provisions in place and your board would like to make it a standard policy, then you’ll need to consider amending your documents. It is advisable to enlist the help of a legal professional when amending your legal documents to ensure that any proposed amendments will not conflict with existing covenants or local, state, or federal laws.
When creating your guidelines, focus on the specifics, such as how owners can qualify for a plan and what documents they need to submit. Make it known that the HOA can still file a lien even with a plan in place and begin collection efforts should owners default on the program. To prevent owners from abusing the setup, the HOA should consider only allowing each owner to one payment plan.
If you have questions about how an HOA dues payment plan may affect your association, reach out to our qualified team at Prism Realty Management today: (512) 609-8098 and info@prismrp.com.