Property owners associations collection issues present special needs. For instance, many times a POA doesn’t have their lot owners’ physical mailing address, much less a phone number. POA boards are trying to collect dues on a lot you can’t even deliver mail to. Imagine trying to collect on raw dirt. What’s a property owners association to do when they have delinquent dues?
Combine this with the fact that many POA dues are small – typically only a few hundred dollars a year. So many POAs have to let many years’ worth of delinquent assessments accrue before the outstanding balance reasonably warrants the legal expense typically involved in trying to collect. And ‘trying’ is the appropriate word. Many board members voice frustration over the fact that even after a lien is placed and foreclosure is enacted, all the association is left with is a big legal bill, lots of time wasted and no dues collected. How frustrating. The answers are simple. And we’ll get to those in a moment.
Common Reasons for POA Delinquencies
There are two common reasons why POA delinquencies occur. One is that members bought the lot in order to go fishing or use the camp grounds, and somehow learn that not paying dues has no real consequence (at least until now). The second reason is due to depreciating lot values. When property owners simply walk away from their lot the POA is left holding the bag, being forced to foreclose (expensive), or deeding the lot back to the State (depending on what State the POA is in). None of these outcomes is desirable.
Three Small Steps to a Solution
Enter skip tracing, credit reporting and phone calls. These three tools change everything when it comes to collecting POA dues. We’ll get to how to you can maintain your relationship with members who have delinquent assessments in a moment.
Skip tracing is the simple electronic process of making sure you have the most accurate contact information for members who are behind on their dues. Using credit reporting as an impending consequence for delinquency is very effective. And it’s common knowledge in the collection industry that phone calls motivate people who owe money three times more than sending letters.
Here’s how these three components come together to build a lasting and effective strategy. Collection agencies who use skip tracing can easily find delinquent members’ accurate mailing addresses and phone numbers. This enables clear and direct communication – a must for collections. Using the consequence of credit reporting POA dues as a collection account motivates members to get current, because credit reporting affects the member personally. Putting a lien on the property really only affects the property. And when a collection agency uses phone calls to communicate to property owners that their late dues will be reported as a collection account if they don’t get moving and get current – well you now have a trifecta of the most effective tools bringing motivated members to pay their delinquent dues.
We’ve seen this formula work on several thousand delinquent balances with several hundred community associations over the past six years. From Florida to Hawaii, this formula holds true.
Now the Most Important Part
Now for the most important part of this process. Always insist your members pay your community association or your management firm directly in any collection activity. No member wants to pay a stranger they don’t know. By simply having members instructed to always pay your management firm or association directly you eliminate what collection industry experts call ‘payment friction’. Payment friction is simply the natural resistance people feel in not wanting to paying a third party. Remember, your members see that third party as being outside of the equation – someone who in their eyes has no right to be asking them for money. Remove that natural barrier by always insisting your delinquent members pay their dues directly to your association or management company.
There you have it: a simple solution with a new twist that’s recovering delinquent POA dues and giving POA boards back their peace of mind.
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