How to Write an HOA Collection Policy

What a collection policy is and why you need one

A collection policy is a written board resolution that describes each step the association takes when an owner does not pay, from the first reminder to legal action. Its main value is consistency: every late account gets the same treatment on the same schedule.

• Owners know in advance what will happen and what it will cost them
• Directors do not have to make a personal decision about each neighbor
• The treasurer or manager can act without waiting for a board vote at each step
• The association has a clean record if the matter reaches a lawyer or a court
• Some jurisdictions require associations to adopt and share a collection policy, so check whether yours does

The policy cannot give the board powers it does not already have. Late fees, interest, liens, and the right to recover costs must come from the governing documents and the law. The policy only sets out how the board will use them.

What the policy should contain

1. Due date and grace period: when assessments are due and when an account counts as late, as set in the governing documents.
2. Late fee and interest: the amount or rate, taken from the documents and within any legal limit.
3. How payments are applied: for example to the oldest charges first, if your law and documents allow the association to set the order.
4. The notice sequence: which letters are sent, when, by what method, and what each one must say.
5. Payment plans: who may approve one, standard terms, and what happens on a missed installment.
6. Referral to a lawyer or collection provider: the trigger, who authorizes it, and that the owner may be charged the costs where the law and documents permit.
7. Liens and further legal action: that the board decides each case by vote, on legal advice.
8. Suspension of privileges: whether amenity access or voting can be suspended, only if the documents and law allow it, and with any required hearing.
9. Returned payments and partial payments.
10. Owner's right to request a ledger, dispute a charge, and be heard.
11. Confidentiality: individual accounts are discussed by the board in private where permitted and never published to the community.

A sample delinquency timeline to adapt

The steps below show the usual shape of a collection process. The number of days between steps is deliberately left for you to fill in, because required notice periods, waiting periods before a lien, and limits on fees are set by your state or province and your documents. Do not copy another community's day counts.

1. Due date passes. Nothing is sent during the grace period, if the documents provide one.
2. Grace period ends. The late fee in the documents is added, and a friendly reminder goes out with the current balance and the ways to pay.
3. Second notice. A formal delinquency notice states the amount, the charges added, the date by which to pay, and the offer of a payment plan.
4. Final notice before legal referral. A letter, sent by the method your law requires, states that the account will be referred and that the owner may become responsible for the costs. Some jurisdictions prescribe the content of this letter and a minimum waiting period.
5. Board review. The board confirms the ledger is accurate, that every earlier notice was sent, and votes on referral.
6. Referral. The lawyer or collection provider takes over contact. The board stops discussing the debt directly with the owner, other than accepting payment as the lawyer advises.
7. Lien and further action. The board decides each step on legal advice. The liens and foreclosure guide explains what these steps mean.

The delinquency notice template gives you wording for the second step, and the late fee calculator helps you check that the fee you charge matches what your documents allow.

Payment plans

A payment plan is usually the fastest and cheapest way to recover a debt from an owner who wants to pay but cannot pay at once. Put standard terms in the policy so plans are offered evenly. Some jurisdictions require associations to offer a plan or set minimum terms, so check before you set your own.

• The plan must be in writing and signed
• The owner pays current assessments in full and on time, plus an installment toward the arrears
• A maximum length for a standard plan, with longer plans needing a board vote
• Whether late fees stop building while the plan is kept
• A missed installment ends the plan and collection resumes at the step where it paused
• One standard plan may be approved by the treasurer or manager, and anything unusual goes to the board

Treat hardship requests with care and with the same yardstick for everyone. Record the reason for any exception in the closed session minutes.

Mistakes that weaken a collection case

• An inaccurate ledger. One wrong charge can undermine the whole claim. Reconcile the account before every formal notice.
• Charging fees the documents do not authorize, or more than the law allows.
• Skipping a required notice, or sending it by the wrong method.
• Treating owners differently without a recorded reason, including going easy on directors or friends.
• Discussing an owner's debt in an open meeting, a newsletter, or a group email.
• Directors contacting the owner informally after the account has gone to a lawyer.
• Refusing partial payments or accepting them without checking with the lawyer once legal action has begun.
• Letting small balances sit for years until they become large ones.

Debt collection and consumer protection rules can apply to association collections, especially when a third party collects. That is one more reason to have the policy and the letter wording reviewed by a lawyer.

How to adopt the policy and tell owners

1. Read the assessment and enforcement sections of the governing documents and list the powers and limits they set.
2. Draft the policy using the contents list above.
3. Have the association's lawyer review the draft against state or provincial law.
4. Adopt it by board resolution at a properly noticed meeting and record the vote in the minutes.
5. Send it to every owner, add it to the welcome packet, and include it in resale disclosures where required.
6. State an effective date, and apply the policy only from that date forward.
7. Review it once a year at budget time.

Present the policy to owners as fairness, not as a threat: everyone is treated the same, and owners who fall behind are offered a plan before costs build up.

Make the routine steps automatic

The early steps of a collection policy are routine, and routine steps are the ones volunteers forget. Reminders, late fees, and notices that go out on schedule remove the personal element and keep the record complete.

Next step: draft your policy from the contents list, fill in the timeline with the periods your law and documents set, and book a legal review. If you want reminders, late fees, notices, and owner ledgers handled on schedule, open the hoa.to live demo and look at the delinquency tools.

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