How an Effective Collections Policy Can Help Your Clients Avoid the Courthouse

Little has a more direct impact on an association’s bottom line than the owner’s payment of assessments. Yet, when owners fall behind on their dues, many boards of directors fail to tackle it head on. Their inconsistent responses — or lack of response altogether — can have significant financial implications.

You can help them avoid these risks by working with them to develop effective collection policies that are applied on a consistent basis.

According to Mitch Drimmer, vice president of business development at Axela Technologies, a national collections firm that specializes in association collections, not many associations have formal collection policies in place.

Some associations just turn to the governing documents when the issue comes up. “But many governing documents aren’t really geared toward collections,” Drimmer says, “They’re geared toward sending a delinquent owner to an attorney.” The attorney typically engages in the legal process of filing a lien, foreclosing, and taking title.

Foreclosure isn’t always the optimal route, though. “Every option needs to be explored prior to commencing a foreclosure,” says Paul Grucza, director of education and client engagement for CWD Group, Inc., an association management company in the Pacific Northwest.

Drimmer points out that the current economy boosts the odds of collection.

“It’s easier to recover money today than it was 2007 to 2013,” he says. “If you have equity, who wants to lose a home over a few thousand dollars in maintenance fees? Back then, you had no choice [other than to foreclose], but nowadays it doesn’t make sense because if you engage with these people, they’ll pay.”

That’s where the collections policy comes in. It provides a road map that an association can follow before turning to legal remedies.

To learn about the five critical elements of effective collections policies, read our new article Why Your Clients Need a Formal Collection Policy.

Best regards,
Matt Humphrey
President