Model Collection Policy for Community Associations

One month delinquent

Send a gentle reminder letter by the 5th of the month, or after a late charge has accrued under the association’s late charge policy. A community member could have easily overlooked the payment. The letter should adopt a friendly tone and should not make threats.

Two Months Delinquent

Send a second letter, again after the 5th of the month or after a late charge has accrued. Assuming that the first letter was not returned from the post office, the association can assume it was received. Accordingly, the second letter should adopt a more forceful tone. It should remind the member of his obligation to make payments and should note that the association can claim a lien for failure to make payments.

Three Months Delinquent

When a community member is three months delinquent, it is time to record a lien. If a community member is three months delinquent, it is more than forgetfulness and more than a temporary financial setback. Under FHA and VA guidelines, a mortgage company must ship a delinquent mortgage to its attorney to begin foreclosure when the loan is three payments delinquent. Because a mortgage foreclosure will trigger a bankruptcy filing in a significant number of cases, and because secured creditors (those with a lien against property) are more likely to be paid in full, the association should record its lien at about the same time the mortgage company would begin foreclosure in order to be treated as a secured creditor.

Six Months Delinquent

If the association has recorded a lien and still has not received payment six months from the start of the delinquency, it is time to begin foreclosure proceedings. Since foreclosure proceedings can take up to a year to complete, the association should be diligent in pursuing the matter. On the other hand, the association probably does not want to begin foreclosure much before 6 months, because attorneys are expensive and the attorney fees incurred may outstrip the amount of assessments, making it less likely that a court would award the attorney fees in full.

© Steve Sowell 2018