Many owners who purchase a home in a Common Interest Development or HOA, do not fully understand the repercussions of making late payments. This is why we encourage our Boards to refer to membership payments as "assessments," not "dues." Living in an HOA is not like joining a club. You can only quit by selling your home. Your payments become a legal and mandatory obligation when you sign the escrow papers, and become the recorded owner on title.
I started in this industry at the A/R (accounts receivable) desk. I was the voice that answered all of the enraged phone calls about missed payments. We would send out our reminder letters for the most part, after the 16th day of the month, so the from the 17th to about the 30th of each month I would be greeted with an influx of misdirected anger. However, instead of becoming defensive and arrogant, I simply listened. This caused most owners to talk themselves down without me having to contribute anything to the conversation. Through this, I gathered information about how we could provide better service to our homeowners. Where there is frustration, there is most likely opportunity for improvement.
Now, I can't balance your checkbook for you. I can't call you every month to remind you to fulfill all of your financial obligations. However, I can help you understand the consequences of non-payment. I can help you understand when your assessments become due and the penalties for non-payment that are prescribed by your Association. I can do what your realtor should have. I can provide information. Education. Assistance. Service.
In California, assessments become due and payable on the first of every month. They are considered delinquent on the second of the month. However, late fees and penalties are usually not levied until after the fifteenth of the month. This is all in California Civil Code, Section 1365.1. Many areas of this law defer to your governing documents, so it is essential to know the basics of both, in order to best protect yourself and your investment. The important thing to remember here is that your Association has monthly bills to pay and they desperately need money in the bank on the first of every month. Although most provide a grace period in order to account for mailing discrepancies and a general lack of oversight, all owners should plan to have their assessments remitted by the first day of the billing period.
The scary part comes when this oversight goes unnoticed for more than 30 days. While many Associations attempt to notice their owners multiple times before initiating debt recovery tactics, civil code allows an Association in California to place a lien on your property after 45 days of nonpayment (30 days of non-payment and they can send the pre-lien letter, but must allow 15 days for your dispute/response). This lien can then be foreclosed on by the Association if left unpaid. That's right. Your Association has the legal right to foreclose on your home for non-payment of assessments. No joke.
Many owners come to this realization way too late. Notices and reminders are simply thrown in the pile of bills and junk mail and forgotten. Association mailings should have the same priority as your mortgage statements. They go hand in hand. Please, do not get this twisted. This is serious business and I will tell you why.
I currently manage an Association that has a 60% delinquency rate. Because the majority of owners are not paying their assessments, the owners who do pay on time have to cover the debt of the owners who are not paying. The owners who are responsible and want to continue living in their homes, have to endure dramatic increases in their assessments. Now, one by one, these owners are becoming disadvantaged. The entire system is breaking down. This is where a State receiver may have to be appointed, as there is no one willing to run for the Board of Directors. A State Receiver has no obligation to the membership and has the ability to raise the dues to whatever amount they deem fit, without needing approval of the membership. Your dues can go from fifty bucks a month to five hundred and fifty in the flash of a pen. This is a nightmare scenario.
So, what can you do to proactively save yourself? Call your management company. Attend a Board meeting. If you have a financial hardship, you have a right to request a payment plan. You have a right to meet with the Board and ask for help. Do not be embarrassed. Do not hesitate. Once an account is sent to a debt collection agent, the agents begin charging for every letter and communication sent in attempt to recover the debt. These costs escalate as each attempt is made. The longer you take to respond, the more debt can be incurred against your account.Foreclosure cannot save you. The Association can pursue these debts personally in a court of law.
This can all be avoided by one simple phone call, preferably before your account is sent to one of these agents. I plead with all of my CID owners out there, please, just give us a call. Don't get pulled beneath the undertow. Raise a flag. Ask for help. There are remedies out there. There is information that may help. You never know until you try.
Be your own advocate. Learn. Participate. ACT.
