Simple Tips for Avoiding a Huge Mess When Trying to Collect on Arrears
Feb. 22, 2013 — As someone who actively litigates collections and lien foreclosures on behalf of community associations, I can offer some lessons that may be of benefit to condominium boards, which historically have a hard time colleting from homeowners in arrears on their monthly charges.
First, communication with delinquent homeowners is critical. Whether you are a condo board member or the property manager, if a delinquent owner contacts you to discuss their particular set of circumstances, it is important to speak with them or return their call as soon as possible to listen to their concerns and try to work out a resolution. No one likes to feel ignored — especially an individual who may be going through financial turmoil and is likely under a great deal of stress.
If a homeowner feels ignored, they may allow the debt to continue to accrue and eventually spiral out of control. If you are working with an attorney who does not timely return a homeowner’s calls, consider addressing that issue immediately.
Next, pursue delinquencies while the delinquent balance is reasonable. It is much easier to negotiate a payment plan on a $500 debt than on one that is $5,000.00. To illustrate, a 12-month payment plan on the $500 debt would amount to a manageable $42 payment per month, while the same payment plan on the larger balance would result in a monthly payment of $417. If your collections policy does not permit a timely turnover to your collections attorney in this manner, you may want to consider amending it.
Finally, to the extent possible, act as reasonably as you can when approving payment plans. I’m certainly not suggesting waiving hard costs, such as assessments or legal fees, or permitting a three-year repayment plan when the board has a pre-approved limit of 12 months. But it may mean a concession by the board to suspend future interest charges on a payment plan as long as all payments are made in a timely fashion, or permitting a four-month repayment plan rather than mandating a lump-sum settlement with a first-time delinquent homeowner.
I find that delinquent homeowners tend to remain current on payment plans where there was at least some minimal give and take from both sides prior to reaching an agreement.
Stephane Dupont is a partner at Winzenburg, Leff, Purvis & Payne. This is adapted from his blog post on his firm's website.
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