There’s no doubt about it – assessments are the lifeblood of community associations.  Without the income derived from assessments, associations struggle to maintain the common elements, provide essential services to residents and protect property values.  While most residents are good about paying their assessments on time, some are not.  Furthermore, since associations traditionally operate on very tight budgets, even a small percentage of delinquent assessments can create a financial hardship for an association.

What are some interesting approaches association boards might consider utilizing to motivate homeowners to pay their assessments on time – or even early?  At the outset, it’s important to note that the following suggestions are not a replacement for your association maintaining and utilizing a good collections policy and procedures.  Instead, these suggestions are aimed toward creating a culture where homeowners voluntarily pay their assessments in a timely manner prior to imposition of your collections policy or utilizing legal counsel to collect delinquencies.

Automatic Debit Program.  Check with your management company or your association’s bank to determine whether there is an automatic debit program available to collect assessments from homeowners.  Since an automatic debit program can reduce costs associated with collections, depending upon your governing documents, you might consider offering a financial incentive for those homeowners who sign up and utilize an automatic debit from their bank account to pay their assessments.  Some associations reduce the amount of the regular assessment payments or may even deduct 1 payment per year for those who sign-up for the association’s automatic debit program.  You will want to take a careful look at your association’s finances before crafting an automatic debit incentive program.  Further, make sure that the database used to track assessment payments for your association is capable of handling an automatic debit program.

Prepayment Plans.  Wouldn’t it be great if your association received assessment payments well before they were even due?  Associations across the United States have created prepayment options for residents.  Typically, associations award those who prepay their assessments with a percentage discount on their assessments.  For instance, an association may offer a 5% to 10% discount for those who prepay.  Prepayment plans and associated discounts can take a variety of forms.  An association may wish to have a tiered prepayment program where homeowners receive a higher discount for paying an entire year of assessments in advance rather than prepaying for shorter terms – for instance, prepaying on a quarterly basis.  Once again, it is essential for your association board to carefully take into account the finances of your association when crafting a prepayment program to ensure the program is fiscally responsible.

Prizes.  Who wouldn’t love the opportunity to win a great prize for simply paying their assessments on time!  Your association may want to consider holding drawings for door prizes for residents who pay their assessments on time.  The door prizes you choose may range from something as simple as a gift certificate to a local restaurant, to a television, to a trip to a warm climate during the wintertime.  If your association is going to consider offering more extravagant prizes, make sure that you have budgeted responsibly and adequately for such prizes.  Further, announce prize opportunities in your association’s newsletter or on your website.  If your association utilizes payment coupons, you may want to enclose an announcement of prize opportunities with the coupons.  Once you have held a drawing in conjunction with your annual meeting, a community event, or at some other time – be certain to announce the winner to the community and get pictures of the winner to use in your newsletter or on your website.

Amnesty Program.  Okay – so maybe your association has more assessment delinquencies than your board would like and they are looking for a way to turn this trend around.  Your board may want to utilize an amnesty program in addition to launching an incentive program to motivate homeowners to stay current on their assessment payments once their accounts have been brought up-to-date.  For an amnesty program, your association may decide to implement a 1-time opportunity for residents to pay their delinquent assessments while waiving all late fees and interest.  (It’s up to your board to determine what late fees, interests, or costs your association is willing to waive during the amnesty period.)  The amnesty period should be held open to all delinquent homeowners for a date certain.  From a practical perspective, amnesty programs should not be utilized on a yearly basis or at regular intervals.  If homeowners become accustomed to their association offering an amnesty program periodically, they may utilize such a program to routinely pay assessments late while incurring no penalties.

Whether your association utilizes an incentive program to motivate homeowners to pay their assessments in a timely manner or not, here are some basic steps that all associations can take to cut down on delinquencies.

  1. Build bridges with the homeowners in your association through open lines of communication.  Members of your association board and management should be accessible to homeowners.  If a homeowner in your association is having a difficult time paying their assessments because of the loss of a job, a major illness or other significant life event – having open lines of communication with homeowners will make it easier for the homeowner to communicate their difficult circumstances to a board member or manager.
  2. Educate members of your association about why assessments are so essential to the association.  Use your newsletter, website, association events and other opportunities to thank members of your association for paying their assessments and to educate them about where the revenue from assessments has been spent and how it benefits them.
  3. Clearly communicate when assessments are due and any penalties for not paying on time.
  4. Adopt a collections policy and follow it.  To learn more about collection policies and related steps to take for delinquencies see “A Practical Approach to Collection Association Assessments.”  Further, as you probably know, Colorado law requires associations to maintain a collections policy and procedures.

 

If your association has used any of the incentive programs above or other programs to successfully achieve voluntary compliance, please email that information to [email protected] and we will pass your success stories on to other board members.

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