What appalls me most about the negative press around HOAs is how some Board Members – either individually or collectively – treat the Members of the Association like crap. The Members aren’t your competitors; they’re not your enemies; they’re your neighbors! Why can’t they be treated that way?
I had a conversation a week or so ago with a board member who was very proud of her recent attendance at a seminar for Board Members put on by a local “HOA Attorney”. (Note first, for a moment, that “HOA Attorney” isn’t among the specializations listed on the American Bar Association’s “Sources of Certification” web page.)
This board member was impressed with the information she received from the attorney who stated (and I’m loosely paraphrasing here) that instead of waiting 21 days to levy a fine or late penalty, an association could move that up to 14 days under certain conditions.
While I was happy the board member had spent time going to an educational session, I was not impressed with the lesson she was taught.
You can find guidance from “HOA lawyers” all over the Internet telling you not to wait, not even a day, when there is a way to screw your neighbors out of a few dollars. Well, it’s not exactly what they say, but that is in fact what many of them mean. Their advice ignores the needs of the community and the compassion and understanding of neighbors. “You’re on the board of a non-profit corporation and you have an obligation to be mean and ruthless.” Again, not exactly what they say, but it’s what I hear them saying, online, and apparently in person in seminars.
I’m not saying boards should never levy fines on violations left uncorrected, or not to add fees to delinquent payments. But why does it have to be done so aggressively?
One reason, of course, is that your management company makes money every time they print a couple of pieces of paper, toss them in an envelope, affix postage, and send it out to your neighbors. Look at your association’s fee schedule, probably dictated to them by the contract with the management company. Also look at your association’s collection policy.
For example, according to documents I’ve obtained in my association, a $10 “re-bill fee” is assessed for the preparation of a written reminder mailed on the sixteenth (16th) day after the assessment due date, if unpaid. Ten dollars to send you a note saying “you’re past due,” which the management company bills the association for immediately. On the thirtieth (30th) day of lateness another letter – a “demand letter,” at a cost to the association of $50 – is prepared and sent to neighbor. (These costs are recouped by the association if and when the member pays the fees.)
All of this is designed to make money – not for the association, but for the management company.
How about your management company’s treatment of your new neighbors? In Arizona, there’s a statutory limit of a $400 maximum charge to send a few documents at the close of escrow. Normally it’s a few PDF files, likely Emailed by a clerk making well under $50 an hour, and probably takes under 30 minutes to generate and send. So they charge your new neighbors $400 for something that likely takes under $25 worth of labor and no materials (if sent by Email – perhaps a few bucks if they have to print it and mail it). There’s so much paperwork at closing, everyone involved simply assumes this is a great deal for the new owners, and it’s simply paid, just to they can get their keys and move in to your happy, caring neighborhood.
I’m all for charging people a fair rate for work performed, but $10 for a re-bill letter, $50 for a demand letter, and $400 for PDF copies of a few documents is overkill! Do you think any of the management companies in Arizona charge less than $400 to provide the documents required by law? If there is one, I hope they’ll write me… I want to know!
When I get on the board (and I will get on the board, in spite of what happened last week), I promise my neighbors that I’ll treat them like neighbors. They won’t get away with not paying, but I’m not chasing them down the street for a few bucks as soon as the due date slips by.
What happens when you do have a neighbor that can’t (or won’t) pay their assessments, and they get behind a few thousand dollars? Someone makes some money putting a lien on their house. And if they continue to get behind (probably because they’re too afraid to come to the board and discuss the issue… because you know the board just has the management company send more letters – no “real discussion” ever occurs, does it?), eventually, your association “has no choice” but to foreclose – again making someone a lot of money. But it’s a business decision to foreclose on people that won’t pay debts. In most communities, it’s very likely that nobody on the board or management company has thought for one second along the way, “What can we do to help this neighbor get back on track?” As one board member said, “I’m not going door to door to get yelled at by the members!” Yeah, I wouldn’t want to talk with you either.
Yes, I’m suggesting communication and compassion first. Then you can take the business approach: Take a home away from your neighbors and set them free. In the long run, maybe you are doing them a favor.