Property Management Professionals (PMP)


April 2, 2020

We are in the midst of an unparalleled global health crisis, uncertain of when it will pass and life will return to normal. At the date of this column, approximately 80% of Americans are under a State Order to stay home, businesses are closed, and people are out of work. Unemployment claims are spiking, and millions of Americans are being impacted. Association Boards should prepare for an increase in delinquent assessments and proactively revisit their collection policies, with an emphasis on compassionate collection efforts that both give owners options for relief while at the same time protecting the Association’s interests.

Decreasing or Waiving of Assessments

While this is a compassionate idea, it is strongly discouraged. Associations are non-profit corporations that operate from a zero-sum budget. There is no margin for profit. Assessments received (revenue) equals monthly expenses, so any decrease or abatement in Assessments is going to have a significant impact on the Association’s fiscal health. While it is truly unfortunate what the current health crisis is doing to the economy and the job market, Board Members have a fiduciary obligation to the Associations they have been elected to serve, and that includes ensuring that the Association is financially solvent and able to meet its operating obligations.

Proactively Prepare for an Increase in Delinquent Assessments

It is important to be prepared without over-reacting. For those who served on Association Boards throughout the Great Recession, loosely defined as late 2007 through 2009, but with lasting implications into the early 2010’s, you are no strangers to operating non-profit Associations through difficult times. So, what did we learn from the Great Recession? What can Association Boards do to prepare for an increase in delinquent assessments? Get out in front of them!

A lesson learned from the Great Recession was that run-away delinquencies without proper collection efforts to secure the Association’s financial interest significantly damaged the fiscal health of countless Associations for many years. One of the most common complaints from Association Boards who approached our management firm for help during this time was that too little was done far too late, and the Association was strapped with exorbitant amounts of bad debt they would eventually have to write off. While Association Boards may be reluctant to proceed with pre-liens and liens when homeowners are out of work and having trouble meeting their financial obligations, it is critical that Boards secure the Association’s financial interest, and a lien is the best vehicle to do this.

Associations should send out regular reminders of when assessments are due, encouraging owners to pay early to avoid unnecessary delinquency expenses or enroll in electronic payment options (such as PMP Gateway, our user-friendly online owner portal). Unique to the current health crisis, we are learning that the

United States Postal Service (USPS) workforce has been significantly impacted by the coronavirus, which is understandable given their exposure, and mail service has been delayed. A gentle reminder to residents regarding the Association’s collection policy, including when pre-liens and liens are filed, can help reinforce the importance of paying assessments in a timely manner. If owners understand the ramifications of not paying their assessments, they will be more inclined to make paying their assessments a priority.

Compassionate Collection Efforts

We understand how difficult it is to watch our friends and neighbors struggle, now more than ever as we navigate through this scary health crisis. It is important to show compassion, but to also keep the Association’s long-term fiscal health and integrity in mind. The current crisis will pass, and once it does Associations will be in a better position to return to normalcy if Board Members have properly overseen the Association’s financial duties, including the handling of delinquent assessments.

Consider sending a memorandum to Association members acknowledging the crisis and the increase in unemployment, sympathizing with those who may be struggling. Recommend that those who are having difficulty paying their assessments reach out to the Association (via Management) to better understand their options. This approach will help Boards get out in front of the problem to better understand the economic impact the health crisis is having on their members, and thus the potential impact on the Association’s short- term revenue. Board Members should discuss remedies to offer struggling owners, such as proactive payment plans that will ensure at least a portion of the planned assessment revenue will be received, while at the same time limiting late fees, interest and other collection fees that could exacerbate the problem for both the owners and the Association.

Pre-Liens and Liens

Do not delay on proceeding with a pre-lien and lien to secure the Association’s financial interest. California Civil Code allows Associations to issue a certified pre-lien once an account is 45 days’ late and a Board may approve a lien once an account reaches 75 days’ delinquent. Many Board Members understandably have a difficult time approving a lien on an owner’s property during economic downturns, but Board Members are not doing owners or the Association any favors by delaying these critical collection steps. Filing a lien accomplishes two things: It signals to owners the importance of paying their assessments and it secures the Association’s financial interest should the owner look to sell (or short sale) their property. Often when owners are faced with financial uncertainty, they prioritize which bills get paid. It is important they understand that their Association assessments should be at the top their list. During the Great Recession, many Associations fell victim to owners selling their homes without paying their assessment balance, leaving Associations with mounds of bad debt to write off at the expense of the other owners living in the community. Ensuring a lien is recorded against the property in a timely manner will mitigate this from happening to Associations during the current health and economic crisis.

Foreclosures (Judicial & Non-Judicial)

Associations have the legal right to foreclose on a property after one (1) year or once the account balance reaches $1,800.00. Let’s be honest, if an account is currently at the foreclosure stage, the delinquent balance has nothing to do with the current health crisis and its impact on the economy. That said, the Community Association Institute (CAI), one of our industry’s most recognized national trade organizations, has called on Association Boards to adopt a 60-day moratorium on foreclosures, or until at least June 1, 2020. While this is not a legal requirement, in the interest of compassionate collections, this is likely a sound policy in light of the unprecedented health crisis impacting our communities.

Late Fees & Interest

In the interest of being compassionate for those directly impacted by the current health crisis, Boards should consider waiting late fees and/or interest charges over next 30 days. As of the date of this article, the State’s “Safer at Home” order went into effect 14 days ago (March 20, 2020), so there would be no reason to waive February late fees or March late fees as the assessment due dates would have predated the current State Order and the resulting spike in unemployment. That said, it is reasonable that some owners may have trouble paying their April assessments in a timely manner and it would be appropriate to provide relief in the form of waiving late fees and interest for the month. Boards can then reevaluate this policy next month and whether to extend this courtesy depending on the state of the current health crisis. It is also important to keep in mind that assessment late fees and interest penalties are typically dictated by the Association’s governing documents, so any abatement of such penalties should be temporary and for a finite period.

We are all being impacted by the current COVID-19 health crisis and the subsequent economic fallout, including spiking unemployment numbers. We are also optimistic that it is temporary and hopeful life will begin to return to normal in the next 30-60 days. It is important to be compassionate for those who are struggling, while at the same time protecting the value and integrity of the Association. This is temporary, we will get through this, and by being fiscally responsible Board Members the Association will be in a better position to return to normalcy once this crisis passes.

If you have specific questions related to your Association, please do not hesitate to email Brad Watson, President of PMP Management at


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