Real Estate & Property Law

How Do You Negotiate A Payment Plan For Your HOA Debt?

The topic of the day for HOAs and Condo Associations is assessments, imposition, payment and collection and I may as well say distrust, frustration, anger, hopelessness, financial devastation, and eventual polarization of the parties.

People in California are trying to walk away from the delinquencies, and getting the surprise of their lives when they find out the HOA or Condo Association is coming after them personally for the debt. I have written about this before, many times. And the collection costs attached to the debt by this time can be quite staggering.

And so many times, the parties get polarized.

But before that happens, if I have reached you in time, I can point you to a good blog about negotiating resolution of the debt - written by a long time pal who has been a community association manager for many years, someone I used to teach management classes with, years ago (before industry organizations got busy and started offering education to managers).

Check it out, visit the blogsite of Gayle Hasley.

If I did not reach you in time, and since I like the really hard questions, here is an all-to-common scenario: the owner realizes that the debt will not go away (sometimes this happens in the midst of a short sale situation) and responds (not always in a congenial frame of mind).

After months of ignoring the association communications, the owner contacts the association and says they cannot pay or they ask to meet with the Board and/or commonly asks for the Board to forgive all or part of the debt.

Owners do have the right to ask for a meeting about a payment plan, if the association offers payment plans (many do) but there are timing limits in the law - within 15 days after the lien notice. And Boards are loathe to (and in jeopardy of being accused of breach of their duty to collect assessments) write down the debt. As for the meetings, some boards waive the timelines and are willing to meet with the owners. However, often the arguments and fights ensue over :

The Board's resistance to payment plans the owner thinks are reasonable.
The Board's policy of appointing fewer than all of the board members to handle the meetings.
The seeming battle over convenience of time for meeting.
The unwillingness of Boards to even discuss writing down the debt.
The owner's arguments that the costs are unreasonable.
AND
Games, power battles, misunderstandings, egos, and frustrations over the economic stressors on both sides, sometimes health issues, and the seeming unresolvable issue of mounting collection costs. If an owner hires an attorney, the HOA or CONDO Association often also hires and attorney and .... well. ... talk about mounting costs! ... Once the attorneys get to arguing ... need I say more?

If the assessments are legally imposed, and the owner's attorney does not understand the rights of the HOA, it becomes a nightmare ... for both sides.

So how do you get it back? .... the ability to negotiate I mean after the stressful and damaging interchange? After the true facts and realities are understood, and something has to give? How can the parties save face (usually it is the owner that needs to do the face saving unless the Board has made some big gaff)?

The obvious answer is "eat crow". Acknowledge the frustrations, the misunderstandings, and the realities, and ... apologize. And as for offering up a payment plan, there is strategy involved -the best course is to propose some lump sum good faith payment, along with a payment plan geared to paydown the delinquency, and keep up the ongoing regular assessments. As a rule of thumb, years ago when I did collections, my guidelines were that for a small delinquency - in the neighborhood of $1000 or $2000 somewhere, a payment plan geared to payoff the delinquency and costs within 6 months (counting the "down" money) would be considered. For a larger delinquency, catching up or paying off the delinquency within a year would usually be considered.

Today, many associations are hurting just like owners in them are hurting, and Boards have to be more careful because in many cases the delinquency rates are higher and the money is slower to come in to cover the bills. So Boards in the various associations have their own standards and requirements if payment plans are offered ... but know this: a bird in the hand is welcome in many cases and so a proposed payment plan coupled with the offer of a portion of the debt to be paid up front (I would suggest at least 10% or more), can be a big carrot.

Full post as published by California Condo & HOA Law on September 01, 2009 (boomark / email).