Home Owners Associations: How to Collect Unpaid Dues
Home Owners Association dues are a part of life for many homeowners, including those who own a condominium, townhouse, or single-family home. The benefits offered by living in a community come at a price that is specified in the deed or in the Home Owners Association bylaws. According to the U.S. Census Bureau, average HOA fees across the country are approximately $420 per year for single-family homes and $2,400 annually for condos. However, sometimes homeowners fail to pay these dues, causing serious problems for their neighbors. So, what can Home Owners Associations do about unpaid dues or fees?
Unpaid HOA Dues Can Cause Serious Problems
In housing communities throughout Virginia, HOA dues are an essential part of community property maintenance (including trash pickup, snow removal, and road maintenance). Some community associations also provide community benefits, such as pools, walking paths, and events. When some homeowners fail to pay their share of the annual dues, HOA Boards are left with very few choices: either increase costs for the neighbors who do pay their dues or reduce services. This unfair reallocation of responsibility can create resentment and anger within a community. Unpaid HOA dues can even lead to larger impacts. Some lenders are unwilling to provide mortgages or refinance in communities where unpaid HOA dues are a problem. One such lender, Fannie Mae, will not guarantee loans for a condominium where more than 15% of homeowners are delinquent on their HOA fees. This inability to secure financing can eventually impact property values.
Collection Efforts v. Foreclosure
Most often, lawyers who work with Home Owners or Condominium Owners Associations will recommend foreclosure to resolve unpaid dues and other fees. Under the Property Owners’ Association Act and Condominium Act, respectively (as well as the HOA’s own bylaws and covenants), Home Owners Associations are empowered to file liens in the land records against property owners who fail to pay dues. If these liens remain unpaid, it is then possible for an HOA to initiate foreclosure on the property in an attempt to collect outstanding dues. However, there are a number of problems with this strategy.
Many community associations do not like having to force foreclosure upon their neighbors as a first resort.
Filing a lien and initiating foreclosure proceedings can be very costly (attorneys’ fees, court costs, etc.).
There is no guarantee that, once a property is foreclosed upon, the HOA will be paid for outstanding dues. First, the home sale price will need to cover any outstanding mortgages and other liens on the property, as well as the court costs, home sale expenses, and attorney’s fees accrued throughout the foreclosure process. Only if there is a surplus leftover will the actual HOA dues be satisfied.
This is not to say that foreclosure isn’t a good tool in a Home Owners Association Board’s tool belt. However, there may be a quicker, less expensive, and more effective route to take. In some cases, collection proceedings are a better first resort. A collection attorney with experience collecting unpaid HOA dues can be a real asset and can make the most financial sense, especially if he or she is charging on a contingency basis. An HOA Board should consult with an attorney who can review the HOA bylaws and give advice on the best action to take.
Working with a Collection Attorney
At the very beginning of the collection process, a collection attorney can begin by initiating contact with the homeowner and attempting to make a suitable payment arrangement. Often, unpaid HOA dues can be collected without the need for extensive litigation and without ever initiating the foreclosure process. If dues cannot be collected simply by sending an attorney collection letter, a collection attorney can move forward to file suit against the homeowner.
When working with a collection attorney, an HOA Board has a little more flexibility in how they can to address unpaid HOA dues. The process will also likely save the Board time and money. Here are some of the benefits associated with hiring a collection attorney:
If the attorney works on a contingency basis, the HOA only pays legal fees if collection efforts are successful. Instead of paying an attorney’s hourly rate to work on the matter, the HOA Board can simply pay a percentage of monies collected to the attorney (expenses such as court costs and service fees are also the HOA’s responsibility).
The attorney can review the HOA’s bylaws to determine whether the HOA is entitled to pursue attorney’s fees, interest, and late fees from the delinquent homeowner in addition to the unpaid dues.
An experienced collection attorney may also be able to negotiate a payment plan on the HOA’s behalf. Surely an HOA board does not want to be in the business of enforcing payment plans and dealing with potential default in payments. A collection attorney, on the other hand, is practiced at ensuring that homeowners stick with their agreements. If a homeowner defaults, the attorney will have legal recourse available.
Collection litigation has an increased likelihood of obtaining payments toward amounts owed. Through collection proceedings, an attorney can utilize judgments, garnishments, and other methods to pursue payment.
Contact Wakefield Law, PLLC
If you serve on a Home Owners or Condominium Owners Association Board that is struggling with outstanding dues or fees, give Wakefield Law, PLLC a call. We have been serving the Northern Virginia community for thirty years, and we are committed to resolving collection disputes with our clients’ best interests in mind. We can be reached for a free consultation at 703-771-9740.