Homeowners are not the only ones who suffer the consequences of delinquent HOA dues. The association itself can face a lot of problems, too. When left unresolved, these problems can spiral and compound until the association is left with nothing to its name.
How Delinquent HOA Dues Affect the Community
To understand how delinquencies impact homeowners associations, you must first understand how these communities work. Homeowners and condo associations collect regular dues or fees from members. These associations then use these collected dues to fund the various expenses of the community. This includes everything from common area maintenance to HOA insurance.
It is the job of the HOA board to calculate dues on an annual basis. They do this by anticipating the expenses for the coming year and then dividing the sum required among the members of the community. Given that everyone in the HOA has a financial obligation to pay dues, you can easily see how nonpayment can affect the association. A high HOA dues delinquency rate can spell disaster not only for homeowners but also for the community at large.
1. Service Interruption
When too many homeowners fail to pay their dues, it could result in a budget deficit. The association won’t have enough money to pay for necessary expenses.
This can include landscaping services, garbage collection, snow removal, and more. Without these essential services, trees and bushes will start to grow out, trash will remain uncollected, and snow will pile up and obstruct roads.
Homeowners associations also pay for the utilities for each common facility. Clubhouses and fitness centers don’t pay for the electricity themselves. The board uses money from the operating fund, which sources its cash from HOA dues, to pay for all of these things and more. As such, if homeowners stop paying their fees, they can expect service interruption.
2. A Drop in Curb Appeal
HOA dues late payment can also negatively affect curb appeal. Associations usually cover the cost of landscaping as well as maintenance in common areas. If an HOA runs out of money, it can no longer pay for these services. This will unsurprisingly lead to a drop in curb appeal.
When bushes and branches become overgrown, they can give the neighborhood an unkempt feel. The same goes for cracked sidewalks, badly paved roads, and malfunctioning street lights. This gives the community a poor image and makes it seem like an unsafe place to live in.
3. Poorly Maintained Common Areas
Homeowners and condo associations typically have common areas and amenities that members can use. But, common areas that accumulate dirt and grime will remain that way without money to pay for cleaning. Worse yet, if these areas become damaged, a shortage in the budget might mean having to postpone repairs and replacements. When this happens, residents can’t use them. This is particularly unfair to residents who pay their dues on time.
If the association keeps these areas open even without proper maintenance, it can result in liability. For example, if algae builds up in the pool area, a resident could slip and hurt themselves. In some cases, the association may be found liable for the incident. The same principle applies to malfunctioning gym equipment, improper electric wiring, and poor plumbing systems.
4. Increased Dues
When there are many cases of HOA dues non-payment one year, it could push the board to raise dues for the next. Boards usually do this to make up for the shortfall in the budget or to ensure that they meet the budget requirement for the coming year.
Having to increase HOA dues is troublesome for both board members and homeowners. Residents don’t like it when they have to adjust their personal budget just so they can continue paying HOA dues. Meanwhile, board members don’t like having to deliver bad news, especially when it comes to money.
5. Special Assessments
A rise in delinquent HOA dues could also bring forth the need to levy special assessments. Boards do this when the association lacks sufficient funds to pay for immediate expenses, but some even charge this for less urgent needs. Many homeowners dislike special assessments because they typically need to pay this sum in one go. On the other hand, associations usually collect regular dues in increments, though some charge them annually.
6. Decreased Property Values
It does not take a rocket scientist to conclude that, when you combine all of the above, property values will naturally go down.
When an association lacks funds to pay for services and maintenance, curb appeal will decrease. And, as many know, curb appeal has a direct relationship with property values.
7. Drive Away Homebuyers and Current Homeowners
As property values in a community plummet, the number of interested buyers will decrease as well. Before long, your association will have a hard time attracting new homeowners and even scare away current homeowners. When you have poorly maintained common areas, abysmal services, and high HOA dues, this hardly comes as a surprise.
Worst Case Scenario: Bankruptcy and Dissolution of the HOA
Bankruptcy is not something that often happens to homeowners or condo associations. But, that does not mean it will forever remain an impossibility. Under certain circumstances, an association may go bankrupt.
As homeowners begin to leave and properties foreclose, an HOA with expensive dues and unsatisfactory services or amenities can face insolvency. When an association completely runs out of money and members, it can even result in dissolution. All of this would have been avoided, though, if the board simply cracked down on delinquent HOA dues and established methods for collecting unpaid fees.
How to Collect Delinquent HOA Dues With Software
Many homeowners associations grapple with delinquent HOA dues. Boards usually find it difficult to collect unpaid dues, especially if homeowners are having financial troubles. More often than not, though, this difficulty stems from a lack of a proper system. With the help of HOA software, you can tag owners as delinquent, generate delinquency reports, send account balances, and follow up on payments.
Condo Manager provides expert collection solutions to homeowners and condo associations everywhere. Call us today at (800) 626-1267 or contact us online for a free demo of our product.
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