Is your community a new development? Is the developer managing the association or still on the board? Are you hearing that vendors aren’t getting paid in a timely way? Is the property starting to show signs of deferred maintenance? These are clues that you should ask: is your community developer paying common charges?
I have heard over the years that developers are not paying or haven’t paid common charges on the lots/units they own, those that have not sold. They don’t have cash coming in from sales so they don’t want to expend money if they don’t have to. If they just started to transition the property to board control this leaves a new board with a big problem – the association often doesn’t have enough money to operate properly.
Don’t fear the developer should want the property to look its best so they can sell the remaining lots or units. This should make the developer more understanding and willing to pay. However, there are situations where the developer has run out of funds and doesn’t have the money readily available. What then?
Solutions
Hire an Independent Party to Oversee Funds
If the developer is still handling the association’s collections and checkbook you have a problem. In the worst cases they are co-mingling association funds with business or personal funds and don’t have a separate bank account for the association. As soon as possible you need to hire a 3rd party to collect funds, oversee payments and provide monthly financial reports. The developer should not be doing your condo or HOA bookkeeping. Hire someone that can be objective, provides transparency and is capable of doing a professional job. If your delinquency case goes to court you’ll need a good set of financial reports to document the monies due to help you win.
Create a Collection Policy
If your association does not already have a Collection Policy or Collection Standard you need to draft one up. The policy will outline the steps that happen to unit owners when they pay late. Hire an attorney that specializes in community association law to help you draft your policy and ensure it follows any state mandated guidelines, gets voted on and distributed to owners properly. Lastly, follow the steps outlined in the policy on all owners uniformly – this includes the developer.
Enforce the Policy with an Attorney
When late letters and demand letters don’t work then you’ll have to turn over delinquent accounts to a collection agency or collection attorney. This is the final step to give your collection policy some teeth. The last thing a developer wants, besides paying past due common charges, is to lose their lots/ units in a foreclosure proceeding.
Get your community developer paying common charges – NOW. By following these steps you can fill up your association’s bank account, get vendors paid up (negotiate with them to drop their late fees) and beautify your property by tackling deferred maintenance issues.