Living in a Dallas suburb with a swimming pool in your backyard. Appreciating your condo complex’s fitness center after a long day at work. Taking your dog to the dog park in Austin. Texas living is full of perks and amenities that only a community association can offer. But what makes those perks possible? Dues, also called assessments.
Whether your community is in San Antonio, El Paso, or Waco, monthly assessments ensure your community can afford to keep your pools clean and your landscaping trimmed. But what happens if someone doesn’t pay their HOA dues?
If not carefully handled, an association can find itself stressed about lost revenue, and the volunteer board feeling harassed by the delinquent owner. It doesn’t have to be this way. When written clearly and upfront, an association can have a roadmap for navigating these sticky situations with grace and legal certainty.
What Is An HOA Collections Policy?
Simply put, an HOA collections policy is a document that lays out how an association will handle homeowners who don’t pay their assessments on time. A collections policy ensures all owners are treated equally and helps the board remember its fiduciary duties to the neighborhood. If an association attempts to collect without a formal policy in place, the collection efforts can quickly become contentious and even lead to legal action.
An association’s collections policy typically governs how homeowners’ association fees are collected. HOA fees are the monthly (or yearly) dues required to pay for an association’s operating expenses and reserves. When you buy a home in a managed community, you sign a contract agreeing to pay your fair share of the association’s bills. An HOA collections policy should clearly state when those payments are due each month and how long you have before your payment is considered past due.
One of the best reasons to have a collections policy is that it gives owners transparency. There’s nothing worse than sending your check late and wondering what will happen next. With a well-written policy, owners know how much time they have to pay their bill, how many chances they will get before the association takes action, and when the hammer will come down.
A collection policy also protects the HOA board. Because the document lays out specific consequences for delinquency and a timeline for when those consequences will be carried out, it’s hard for an owner to argue that the board is picking on them. As long as the board consistently follows the policy’s collection schedule, they can be confident they’re doing right by the fiscal health of their community.
What Should an HOA Collections Policy Include?
A good HOA collections policy protects the association from legal trouble and is readable enough that the average homeowner will understand it. To ensure your HOA collections policy works in the Texas market, there are several details you should include.
1. Due Dates And Late Fees
The first item your policy should state is the due date of the assessment. The day of the month is when payments are considered “late.” You should also define the grace period, which is the window of time after the due date that has passed before a payment is considered late. For example, if payments are due on the first of the month, the grace period may extend to the fifth.
Late fees and interest rates should also be included in this section of your policy. Both late fees and interest rates should be reasonable amounts backed by the association’s governing documents and Texas statutes.
2. Notice Requirements
Homeowners have a right to know when they are delinquent. A strong policy will lay out a series of notices that escalate in seriousness until the association exhausts all opportunities to collect. Each notice type has specific requirements that must be met for the association to use them in Texas.
3. Payment Plan
Texas law requires HOAs to offer delinquent owners payment plans. While the policy doesn’t have to offer payment plans, it should state the minimum and maximum lengths of any approved plans. Administrative fees may also be included here.
4. Costs of Collection
If an association hires a third-party company to collect on its behalf, that company will likely charge the association a fee. Whether it’s an attorney, collection agency, or assessment management service, those fees can be passed on to the delinquent owner and should be listed here as “costs of collection.”
5. Application Of Payments
Once the association receives a payment from an owner, it’s helpful to define the “order of operations.” For example: Payments are applied to assessments overdue first, then current assessments, then late fees and interest, and lastly towards legal costs.
HOA Collection Process In Texas
HOA dues collection is pretty standardized across the Lone Star State, but the Texas Property Code does provide certain protections for Texas homeowners. For associations operating in a residential subdivision, Chapter 209 of the Texas Property Code covers most scenarios of collections.
The biggest thing to understand about Texas HOA late fees is that the association must always give homeowners a chance to pay. Texas law forbids harassing phone calls and emphasizes communication via mail.
Step 1. Late Statement
Like any other bill, if the homeowner doesn’t pay their assessment on time, the association will send them a statement. If the owner still doesn’t pay, the association will kick off the collections process after the grace period has expired.
Step 2. First Late Notice
The first item in the association’s toolbox is a late notice. This letter comes with the bill and will generally reiterate the amount due and when it was supposed to be paid. If the grace period has passed and the owner’s account is still delinquent, the association will move on to the next step.
Step 3. The 209 Notice
The 209 Notice is a heavily regulated letter that must be drafted in a specific format. Once sent, the owner will receive a certified letter detailing their delinquency, 30 days to “cure” or pay the debt, and instructions to request a hearing with the board if they wish.
Step 4. Lien
After the 209 notice has expired, the association can file an assessment lien. An assessment lien is a public document that shows anyone who searches the records that your home has an outstanding debt with the association. It typically prevents the owner from selling or refinancing until the hoa fees are paid.
Step 5. Foreclosure
In extreme cases, Texas HOAs can even foreclose on a property to force an owner to pay the association. Foreclosure is a complicated process that involves many homeowner protections. For instance, an HOA cannot foreclose on a property for fines or attorney fees alone. Additionally, most foreclosures done by associations must go through the judicial process, meaning a judge must approve the foreclosure.
Best Practices For HOA Boards
Collecting HOA delinquent dues is rarely fun, but it’s part of the HOA board’s job. Remember that the other members of your homeowners association are your neighbors. They probably have children in the same school district as your kids. A few simple rules can help the board navigate these situations with humanity and empathy.
Apply the Policy Consistently
The fastest way to invalidate an HOA collections policy is to not follow it. If Bobby’s late fee is waived because he’s the board president’s nephew, then Sue down the street will demand to know why *her* fee was not waived when she missed a payment. Have the board review the policy each year so they understand how and when it should be applied.
Use Software
Technology has made homeowners happy in ways that were not possible even a decade ago. With online portals, homeowners can set up auto-pay or easily see their account balance at any time. By leveraging technology, boards can cut down on the number of “accidentally” delinquent accounts.
Talk To Members Early
People don’t typically fall behind on purpose. If an owner loses their job, gets sick, or experiences a financial hardship, they will sometimes fall behind on HOA fees. Sending a first notice letter can kill what would otherwise be an affordable payment plan.
Quick Tip | Start collecting dues early
Instead of making owners wait until the first of the month to pay their bill, make dues continually due. Also, send out a friendly email reminder five days before payments are due. By taking these two steps, you’ll cut down on late payments and late fees collected by the board.
Improve HOA Financial Planning With SBB Management Company
Few boards have the time or desire to track thousands of dollars of payments as they come in. Creating and maintaining an HOA collections policy can be a daunting task for volunteers. Fortunately, Texas homeowners can turn to SBB Management Company to help.
Our knowledgeable team has spent over 50 years perfecting our HOA management services across the Dallas-Fort Worth and Houston areas. We pride ourselves on providing a “quality over quantity” approach to association management. By dedicating resources to maintaining your community’s finances, you can rest easy knowing daily financial reconciliations are being done and you’ll have access to real-time reporting through our online portal.
When you work with a locally owned business that treats your budget the way we treat our clients’ budgets, you get a team that genuinely cares about your community. Move away from “cookie-cutter” association management and partner with a company that understands Texas HOA laws and cares about your property values.
Contact SBB Community Management today to learn more about our financial management solutions and upgrading your HOA’s financial practices.
Frequently Asked Questions
Q. Can my HOA kick me out of the pool for not paying dues?
In many cases, yes. If you have an unpaid balance with the HOA, the board can restrict your use of common amenities. Texas HOA’s usually must provide notice and an opportunity for a hearing first.
Q. How much can an HOA charge me for late fees?
Texas law requires that all HOA fees be “reasonable”. While your governing documents can provide a specific late fee amount, that amount could be disputed in court if it’s too high.
Q. Will interest continue to accrue if I’m on a payment plan?
In most cases yes. The purpose of a payment plan is to stop the board from taking further collection action. As long as you make your agreed-upon payments, the association can’t move forward with liens or lawsuits.
