Effective Collection of Community Association Assessments
Community Associations Institute (CAI) encourages the creation and continuation of effective methods to ensure efficient, economic, and successful association collection procedures. CAI opposes the enactment of overreaching governmental limitations on effective collection of assessments, fees, and other charges of community associations. CAI supports laws that strengthen such collection methods, provided collection methods are undertaken in a fair and reasonable manner, giving the affected owners notice, the opportunity to be heard, and other due process protections.
The financial viability of any community association ultimately depends on its ability to collect assessments to meet continuing expenses. Governing documents include language that each owner, by acceptance of deed or other conveyance of property is deemed to covenant and agree to pay to the association the annual assessments. This obligation to pay assessments is vital to the community association’s viability and integrity, and boards of directors (boards) have a fiduciary obligation to ensure the timely collection of assessments. Boards use these assessments to maintain common areas, buildings and amenities, to support the overall administration of the association, and to provide community services to owners. The overall health and welfare of the association is wholly dependent on timely collection of owners’ assessments.
Where delinquencies are high in a community, the association suffers. Other owners are forced to pick up the financial shortfall and bear the burden, both in time and resources, in attempting to collect from delinquent owners. Additionally, high delinquencies in a community may conflict with federal lending criteria, thereby jeopardizing an owner’s ability to secure financing with lenders or to attract new buyers. Further, communities that experience high delinquencies are typically unable to maintain healthy reserves for capital improvements and the physical appearance, soundness, and integrity of the common elements. Community associations must be able to collect promptly and efficiently from delinquent owners in order to meet their budgetary obligations each month. The goal is to avoid expensive litigation and other collection expenses over a long period of time, and to minimize the burden of increased common expenses on remaining owners.
CAI opposes the intervention of federal, state, or local governments by statute, ordinance, or regulation in collection or oversight of collection of assessments from owners. Community associations are creations of contract. Any kind of governmental involvement in the collections of associations interferes with the contractual covenants and undermines the association as a private entity. Further, governmental interference, however minimal, may compromise the ability of community associations to successfully collect from delinquent owners in the most practical and efficient manner. Additional expenses and delays for the association may also result. Finally, CAI contends that individual associations, and not the government, are in the best position to manage their own communities. Self- management is consistent with the rights and responsibilities included within community association governing declarations as well as with the expectations of owners who purchased in a particular community.
RECOMMENDATION
While many states already require community associations to create and distribute a board approved collection policy, such a requirement is not yet mandated in each state. To assist in compliance with regular collection procedures, CAI recommends that every association establish a collection policy that is adopted by its board of directors, reviewed by the community association’s attorney, and distributed annually to its owners. The policy must be subject to the provisions of the governing documents and comply with all applicable laws of the jurisdiction. Whether or not the association has adopted a formal collection procedure, CAI recommends that no delinquency be foreclosed without an affirmative vote of the community association’s governing board. This ensures fairness to all parties by requiring the board to be satisfied that foreclosure is justified.
Adopted by the Executive Committee, April 10, 1983
Amended by the Public Policy Committee, October 6, 1993
Adopted by the Board of Trustees, October 9, 1993
Adopted by the Board of Trustees, March 2011
RELATED LINKS
- Debt Collection for Community Finacial Stability