Establishing a Collection Policy for Condominium and Common-Interest Community Associations
Many condominium and common-interest community associations are faced with a cash-crunch crisis when members fall behind in the payment of their proportionate share of assessments and common expenses. Associations are businesses, even if not-for-profit, that needs revenue to operate. Thus, it is imperative that Associations remain financially viable by collecting assessments. Assuming the board has confirmed the contents of its governing documents with regard to the payment of assessments and/or common expenses, it is important that each association adopt a collection policy that must be strictly enforced against all members. The board must not treat any members differently as other legal situations such as fair housing complaints can arise, leading to costly litigation. Additionally, Illinois law is clear that an association’s restrictions must not be arbitrary in their application.
Any collection policy that a board establishes must be in writing and can be established by a board resolution or as a revision to the association’s rules and regulations and does not require unit owner approval. However, do not forget that any collection policy implemented must be consistent with the association’s other governing documents.
The board should consider the following points when establishing a collection policy (this list is not exclusive but a sampling of what a collection policy should entail):
- State that all assessments are due on the date set forth in the governing documents.
- State that members are responsible for remitting timely payments whether or not a statement or coupon book is provided or received.
- Stress that late fees are imposed on a certain date if payment is not timely received by the due date.
- Remind members to review their accounts and when necessary and to periodically request a statement of their account.
- Remind members of the proper location for the remittance of payments.
- Remind members that withholding payment of assessments, rents or other common expenses because of dissatisfaction with services provided, non-use of facilities, or disputes concerning repairs or maintenance is not permitted under the law.
- The board should establish whether default and/or reminder notices will be sent to delinquent members and when accounts will be placed with an attorney for collection.
- The board should establish a policy that provides whether members will be granted a payment plan prior to the account being placed with attorney for collection.
- The collection policy should point out legal remedies available such as forcible entry and detainer and/or lien foreclosure lawsuits.
The primary purpose of a written collection policy is to ensure that all members understand their obligations. The above information should be used as a reference in establishing a collection policy that suits the needs of each individual association. Although the board may work with members to a certain extent, the board should not deviate from its established collection policy and should set the example that it will take whatever legal steps are necessary to ensure that any amounts owed are collected. We would also like to remind board members that they have a fiduciary duty to not forbear the payment of assessments by any member and that the board has an obligation to collect assessments.
If you would like assistance establishing a collection policy for your community, please click here [1] to contact HOA Attorney Katerina Tsoukalas-Heitkemper [2] for a complimentary consultation.