In Florida, homeowners associations (HOAs) and condominium associations must collect assessments to maintain their properties and provide services. However, not all residents pay on time or in full, creating financial challenges that can impact the entire community. Establishing a clear, effective collections policy is essential to ensure that associations can maintain their financial health and continue serving their residents. This article provides an overview of the steps needed to create a collections policy for associations in Florida, using the guidance of Florida Statutes 718 and 720, which govern condominium and homeowner’s associations, respectively.
Step 1: Establish a Clear Collections Policy
- Understand Legal Requirements
Florida Statutes 718 and 720 set specific guidelines for associations in collecting assessments. Florida Statute 718 applies to condominium associations, while Statute 720 applies to HOAs. Both statutes give associations the authority to impose assessments on members and pursue collection actions when members default.
- Notification Requirements: Under both statutes, associations must provide residents with written notice before taking any legal action to collect overdue assessments. Florida Statutes 718.116 and 720.3085 detail the procedure for notifying residents, including a 30-day notice period, before escalating the collection process.
- Interest and Late Fees: Both statutes allow associations to impose interest and late fees on overdue assessments, but the exact amounts and rates must comply with statutory limits and the governing documents of the Association. Interest may be imposed according to Florida statute, regardless of whether it is stated in the governing documents; however, late fees can only be imposed if explicitly allowed in the governing documents.
- Define Collection Timelines and Escalation Procedures
A well-defined timeline helps ensure that residents are aware of when their payments are due and when they may face penalties for late payments. An effective timeline should:
- Clearly state when assessments are due and when they are considered late.
- Specify when late fees and interest will apply and provide details about these fees.
- Outline the stages of escalation, such as sending reminder notices, issuing formal demand letters, and eventually pursuing legal action if necessary.
- Establish a Payment Plan Option
Florida statutes provide associations with some flexibility in offering payment plans for delinquent residents. While not required, offering a payment plan can be a proactive way to help residents facing temporary financial difficulties stay in good standing. However, it’s essential to ensure that any payment plan offered to one owner is available to all, avoiding potential claims of selective enforcement against the association. Clearly define the terms of payment plans in the policy, including:
- Duration and installment amounts.
- Consequences for defaulting on the plan.
- Restrictions, such as a limit on the number of payments plans a resident may request over a certain period.
- Document All Collection Actions
Document each step taken, including:
- Copies of notices sent to the resident, including dates and content.
- Records of communications with the resident, such as emails, phone calls, or letters.
- Documentation of any fees or interest charged.
Step 2: Common Pitfalls to Avoid in Association Collections Policies
When crafting and enforcing a collections policy, associations should be aware of several common pitfalls:
- Failing to Follow Governing Documents and Statutes
Governing documents, the declaration, bylaws, and articles of incorporation, dictate specific requirements for the association’s operations. If an association deviates from these rules, it may face legal consequences. Additionally, failing to adhere to Florida Statutes 718 and 720, particularly in terms of notification and escalation procedures, can result in the association’s inability to collect assessments legally.
- Inconsistent Application of the Policy
Consistency is key in enforcing any collections policy. Applying the rules inconsistently or showing favoritism can lead to disputes and even legal challenges. All residents must be treated equally, and the collections process should be applied uniformly to ensure compliance with fair debt collection laws.
- Lack of Transparency and Communication
Residents are more likely to comply when they understand the collections policy and the consequences of nonpayment. Failing to communicate the policy clearly and openly can lead to confusion, misunderstandings, and resentment. Ensure that the policy is easily accessible to residents, either through the association’s website or a resident portal, and provide regular reminders, especially when policy changes occur.
- Delaying Collection Efforts
Delaying collection actions can create significant financial strain for the association, as overdue assessments may accumulate, affecting cash flow. Implement a proactive approach by promptly issuing late notices and enforcing the collections policy according to the established timeline. Delays may also impact the association’s legal standing in collecting the debt, particularly if the statute of limitations for collections actions expires. Keep in mind it is easier to collect $1000 than $10,000. Don’t wait until the debt accumulates to start collection.
Step 3: Communicating the Policy Clearly with Residents
Clear, consistent communication is essential to ensure residents understand the collections policy and its importance to the association’s financial health. Hold a Board of Directors meeting open to all members, allowing for an open discussion on the collections policy before the Board formally moves to approve it. Once approved, provide copies of the policy to all members.
- Introduce the Policy with a Written Notice
When the collections policy is first implemented or updated, attach a copy of the Collection Policy with the formal notice of Board of Directors Meeting for discussion. Provide contact information for a designated association representative in case residents have questions or concerns.
- Offer Resources and Information Sessions
Provide educational resources on why timely assessments are critical to the community’s well-being, explaining how assessments fund essential services and amenities.
- Provide Regular Reminders and Policy Updates
Remind residents of the collections policy at regular intervals, such as quarterly newsletters, email updates, or a dedicated section on the association’s website. When changes to the policy occur, provide advance notice with a summary of the changes and a clear explanation of how the new terms affect residents.
- Make the Policy Accessible and Easy to Understand
Avoid legal jargon when communicating the policy. Instead, use simple language that all residents can understand.
Conclusion
For Florida associations, establishing an effective collections policy is essential for maintaining financial stability and providing services to the community. By following the steps outlined above and adhering to Florida Statutes 718 and 720, associations can create a clear, legally compliant collections policy that minimizes financial losses from unpaid assessments. Avoiding common pitfalls, such as inconsistent application and delayed collection actions, and fostering open communication with residents can improve compliance and promote a positive community atmosphere. With a well-designed collections policy, associations can protect their financial health while treating residents fairly and consistently.
For further information or assistance in establishing a collections policy, please contact:
Dania S. Fernandez, Esq.
Dania S. Fernandez & Associates PA
Email: dania@dsfpa.com
Phone: 305-254-4492
Website: www.daniafernandez.com
