In good times and bad people fall behind on their obligations and require some time to sort out their finances. This happens often in condos and HOAs and the best solution is to offer an owner who has fallen behind a payment plan.
What is a Payment Plan?
A payment plan is a simple document where an owner promises to make payments to the association. These payments should include payments that come due during the time of the payment plan. The idea is that if somebody owes money today and enters a payment plan, they will arrive at a zero balance in a set amount of time. Sounds easy, and it should be but there are some questions that people have so let us get right down to it.
Payment plans should be realistic and fit into a family’s economy.
Payment plans should be over a reasonable amount of time.
Payment plans that stretch out will ultimately fail.
Payment plans should spell out all the details of what is expected of the delinquent owner and the association.
Here are some of the frequently asked questions and answers regarding Payment Plans.
Some of these questions come from the board, some the homeowners, and of course, there are some general questions.
How Payment Plans Work
How do payment plans for HOA and Condos work?
When a delinquent owner comes to the conclusion that they want to come up to date they can contact their management company or if they are in collections the collection agency to engage a plan that ultimately resolves the debt. This is done through incremental payments over a set period.
What is an example of a typical HOA or Condo payment plan?
The formula to calculate a payment plan is quite simple: The amount owed, divided by the number of payments allowed by the community documents (or alternately, the amount owed divided by the amount the debtor is able to pay each month). The payment plan should take into account what they owe and the time given to pay the debt down. Once that time is complete and all the payments are made the result should be in a zero balance.
So if a unit owner owes $2000, and the association documents specify that a payment plan must be resolved within 1 year, then the monthly payment would be $2,000/12=$166.67 per month. If the documents do not specify payment plan terms, and the debtor is only able to pay $100/month, then the payment plan terms would be 20 months ($2000/100=20).
Are there any laws that govern payment plans for HOA or Condo Assessments?
Yes, in certain states before any collection actions can be taken the association must offer a delinquent owner a chance to enter into a payment plan. Many communities have payment plans outlined in their collections policy (and if your community doesn’t, your board may wish to adopt one – here is a sample uniform collections policy) that may further define how payment plans can work in that association. So be sure to check both your state statutes and the community’s governing documents.