Best Practices for Handling Homeowners' Late Payments

Best Practices for Handling Homeowners' Late Payments

No items found.
May 18, 2021

Managing dues payments as an HOA board member or property manager is never an easy task. Navigating the process of late HOA payments from homeowners can be uncomfortable and challenging almost all of the time. Financial situations, especially those involving some form of conflict between the association and residents, can often cause negative or combative emotions to arise between parties, which can create tense situations that require delicate handling. 

Part of what makes HOA boards and property management companies successful is planning and executing effective strategies for dealing with late payments from homeowners. When boards and management companies can be understanding and helpful to homeowners who may be behind on their dues while also maintaining clearcut standards for payment garner the best outlook to have when handling late payments.

To improve this process, understanding the best possible practices for handling tense situations is of utmost importance. The first step to improving the process is establishing how and when to notify homeowners of missed or late payments without creating an adversarial relationship between the board and residents.

Below, you will find a short and straightforward guide that showcases a few of the best ways to communicate with homeowners regarding late payments, along with a FREE template for a late payment letter which you can use to handle these types of situations within your HOA:

Implement a consistent and timely reminder system for late payments

The most effective way to minimize the number of late payments within your HOA is to install a clear and consistent reminder system for all homeowners’ upcoming dues and fee payments. These reminders can be distributed in many ways, such as through letter or email form and the HOA’s website, and can vary when the notices are delivered depending on what works best for your respective HOA. 

The more critical factor is that practices remain consistent. What homeowners should expect is knowing precisely where and when to find information regarding upcoming payments without those notices showing up last minute. Without such a system, the problem not only lies with homeowners who might be now scrambling to pay their dues on time but also with the HOA board, which has, in turn, created a new set of problems for itself by not setting up a reminder system in advance. Delivering these reminders creates practical communication standards for homeowners and assures the HOA board that it is doing its absolute best to maintain the due collecting process. 

Be fair and lenient regarding late payments… to a degree

An admittedly tricky practice to follow, maintaining a level of understanding and fairness in the due collecting process is critical. Board members need to balance remaining diligent regarding due payments without punishment from the first delay in payment. 

Standard practices that can help an HOA in this scenario include implementing grace periods for due payments, varying in length depending on the HOA, that allow homeowners who are behind a chance to make up their dues without incurring extra penalties. Another way to remain fair and lenient in the initial late payment stages is to send a letter to the homeowner behind on their payments explaining their situation when their grace period to pay will expire (for more information, see the sample letter below).

Even implementing a payment plan for the homeowners to make payments through may expedite the process. Allowing a small amount of understanding and leniency in the initial stages maintains the trust and relationship-building between the association and its residents. Although things may eventually escalate from that point to higher forms of punishment, it’s best to give homeowners a window to make up for their missed payments. 

Make the late payments letters quick and consistent 

The speediness of the initial late payment does matter to stay on top of the situation. Since these payments often end up paying for a large portion of the daily operations that keep the HOA running, the last thing the HOA needs is to delay further receiving the funds owed. This is because the board and management company have not adequately notified homeowners of missed or delayed payments. It should be a priority for the board to ensure if a fee has been overlooked that the homeowner is notified quickly so that the board can recover missing funds ASAP. 

Below, you will find an example of a late payment letter for use early on to notify homeowners about their missed dues and how they can make up for those late fees.

Download the FREE Late Payment Letter here!

Enforce stricter punishments if necessary

Unfortunately, there may be occasions that board members or management companies will have to enforce stricter punishments or restrictions upon delinquent homeowners. The case that will most likely arise is when homeowners still have not paid dues owed after several notices and a lengthy window to make a payment have been granted. In these cases, board members have several options depending on state laws. Many of these solutions include instilling liens or judgments against the homeowners and their property, filing a lawsuit against homeowners, or taking them to small claims court to retrieve payment. Although some of these options may be harsh, they should be used with complete confidence by the HOA board under the right circumstances.

How TownSq Helps Management Companies Streamline Payment Processes

A management company can leverage massive success by offering the option for homeowners to pay their dues online via TownSq. When management companies utilize TownSq for payment management, they have the ability to: 

  • Simplify payments from top to bottom by centralizing the entire process within TownSq;
  • Integrate an accounting software, enabling homeowner payments via TownSq directly;
  • Send late payment warnings or payment reminders;
  • Homeowner can access the information regarding the ledger in his account directly within TownSq.

If you think your management company can benefit from a complete solution like TownSq to help managers, boards and residents, click here to receive exclusive access to a tailored demo with a member of the TownSq team. You’ll be able to see the software in action, as well as see firsthand how its solutions can completely streamline your business. We look forward to talking with you!