Are there delinquencies your board of directors does not want to address?
If you have an “elephant” in the board room of your condo or HOA, it’s most likely that the elephant is delinquencies by other owners in the association. Let’s be honest; sometimes it’s just easier to let your neighbors get away with not paying their fair share, than it is to bring these issues to the table. Confrontation can be messy, and it’s easy to default to the unlikely hope that the problem will somehow resolve itself.
In the long run, though, ignoring delinquencies does a disservice not only to the association but also to the group’s collective ownership—even to that neighbor who avoids their payment. By allowing a delinquency to drag on, you’re enabling your neighbor, letting them dig a financial hole so deep that they may never get out. In addition, you’re punishing the neighbors who pay on time by mindfully allowing a shortfall, one that must be recovered through higher maintenance fees, special assessments, or reduced services.
It may help to know that you’re not alone. This elephant has taken up residence in virtually every community association across the country. What can make you different from the rest is the way you deal with the elephant; your response is a true demonstration of leadership.
Here are seven strategies to manage the elephant:
- Make sure you have a problem. Perceptions aren’t necessarily reality. First, make sure there really is an elephant. Before your next board meeting, put delinquencies on the agenda so that everyone knows the subject will be discussed. Have your community association manager, office manager, or accountant provide an aging list of the delinquencies so that the board is properly informed at the meeting.
- Acknowledge its presence. If you discover that the elephant does exist, resolve to deal with it, and encourage your board to make a similar commitment. Identify the nature and scope of the problem and determine whether it is an isolated event or a trend; if it is a trend, this could indicate that the problem will get worse. In either case, now is the time to deal with it. Don’t allow foot-dragging or delays; remember that elephants grow quickly, and collections delayed are collections denied.
- Time is of the essence, especially if you’re addressing an issue that’s been simmering for a while. The best way to deal with delinquencies is to meet them head on and as soon as possible. This is not a problem that gets better over time, and in many circumstances, it can be contagious.
- What is the real issue here? Be direct, honest and detailed. It is essential to be straightforward, even if the facts are unpleasant. The problem is that you need to collect money from another member of your association who may be your neighbor. Tiptoeing around delinquencies will only perpetuate the tension. Being direct builds respect and trust. By naming what everyone is avoiding, you will transform the elephant into an obstacle that people can tackle together.
Take care of it before it becomes a full-fledged circus.
- It’s time for an action plan: Before your meeting, identify ways to address the problem. In most community associations, the default reaction is to send the files to the association’s attorney. This means a lien will eventually be filed and the attorney will likely want to foreclose on the unit. This “legal process” can be complicated, involving a number of parties, including the institution that holds the mortgage on the unit. It may not be the best way to go, because the legal fees you invest may not be recoverable. Consider a “collections process,” where the file is sent to a specialized collection agency that will agree to merit-based compensation. This means that if they don’t recover their fees from the delinquent owner, the association won’t have to pay anything. As you develop your plan, ask yourself what outcome you’d like to see. Be brave, be creative and be organized about your goals and objectives so you can keep the dialogue open and communication clear and concise. Don’t just send the problem to the attorney because it’s what you always have done…Take time to think about the best way to address the elephant in the room.
- Community associations are emotional minefields. Some people may be sensitive or hurt during the discussion; some are likely to be expressive, while others may become quiet and withdrawn. Make sure to be mindful of emotions by acknowledging and appreciating what people are feeling. This is never an easy task.
- Discuss the options. Keep all options open and call in an expert to make a presentation to the board. Gather the facts and encourage people to speak and ensure time for feedback and discussion. The elephant has probably caused some degree of unrest, so give people voice to express their thoughts. Maintain an atmosphere where they feel comfortable being open with each other and sharing their perspectives.
The most import principle is to address the issue as early as possible, ideally before it even becomes an elephant. The sooner it’s resolved, the sooner you can focus on other priorities. If there’s an elephant anywhere in your community association, don’t delay— take care of it before it becomes a full-fledged circus.