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  • Writer's pictureChristopher Beatty

A Guide to Effective HOA Dues Collections

Homeowners associations (HOAs) play a crucial role in maintaining and enhancing the value of residential communities. However, the smooth functioning of an HOA heavily relies on the prompt payment of dues by homeowners. When homeowners fall behind on their dues, it becomes necessary for the HOA to employ an effective collections process to ensure financial stability and protect the interests of the community. At Red Rock, we've developed a three-step process, coupled with strategic legal measures, to effectively handle collections for delinquent HOA dues. This article will outline the recommended steps we follow, provide insights into successful collection averages, and highlight the importance of these processes.


Step 1: Friendly Reminder

Red Rock Management's collections process begins with a friendly reminder to homeowners who have fallen behind on their HOA dues. This initial contact serves as a gentle nudge to prompt payment and maintain positive communication between the HOA and the homeowner. Often, homeowners may simply overlook their obligations, and a friendly reminder can effectively resolve the issue without escalating the matter further.


Step 2: Formal Notice

If the friendly reminder fails to elicit a response, Red Rock Management escalates the collections process by issuing a formal notice to the delinquent homeowner. This notice conveys the seriousness of the situation and emphasizes the homeowner's responsibility to fulfill their financial obligations to the community. Red Rock Management ensures that all formal notices are properly documented and recorded to maintain a comprehensive collections history.


Step 3: 15-Day Demand Letter

When previous attempts fail, Red Rock Management sends a 15-day demand letter to the delinquent homeowner. This letter serves as a final warning, clearly outlining the consequences of continued non-payment. The demand letter underscores the possibility of legal action, such as filing a lien on the homeowner's property, if the dues are not settled within the specified timeframe.


A process to collect hoa dues
HOA Collections

Strategic Legal Measures

If the three-step process does not yield the desired results, Red Rock Management coordinates with its partner law firm to file a lien on the delinquent homeowner's property. By placing a lien, the homeowner is unable to sell the property without first clearing the outstanding dues. This legal measure creates a significant incentive for homeowners to resolve their payment obligations promptly.


Foreclosure as a Last Resort

In extreme cases where homeowners persistently refuse to pay their HOA dues, Red Rock Management recognizes the option of filing for foreclosure on the delinquent homeowner's property. While foreclosure should be considered a last resort, it can be an effective tool for recovering outstanding dues and restoring financial stability to the community. The threat of foreclosure often compels homeowners to settle their debts before reaching such dire circumstances.


National Averages and Supporting Information

A study conducted by the Foundation for Community Association Research found that, on average, HOAs who follow a similar process as Red Rock's collect approximately 90% of annual assessments. This figure demonstrates the importance of an effective collections process in ensuring financial stability for HOAs. Furthermore, employing legal measures, such as filing liens or pursuing foreclosure, can significantly increase the likelihood of successful collections.


If you have any questions or would like to learn more about Red Rock, reach out to us at support@gowithredrock.com.

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