Several ROCs have contacted me this summer about an increase in the number of residents that have not paid their monthly or quarterly rents or maintenance fees. The effects of the economic crisis are now being felt in resident owned communities and there have even been several ROCs in Florida that have been forced to file for bankruptcy protection due in part to unpaid maintenance fees.
I often remind ROC board members that community associations are not banks. ROCs that continually allow residents to pay rents, maintenance fees, or assessments after the due date function as a bank for those residents by giving those residents an interest free loan for the amount that’s due–and each day that that loan remains unpaid puts greater economic pressure on the ROC and the residents that do pay on time.
ROC managers know that the longer rent or maintenance fees remain unpaid, the greater the chance that the association will have to resort to legal action to attempt to collect the unpaid amounts–which will be growing with each missed payment.
I’d like to offer a few suggestions to help ROCs deal with this dilemma:
- Every ROC should have a policy for dealing with residents that fail to pay rents, maintenance fees or assessments on time. Every resident should be made aware of the policy and board members should stress that the policy is necessary in order to allow the community to meet its financial obligations.
- This is not the time to "play favorites". Unless there are extraordinary circumstances, all residents that are delinquent in payment of rent or maintenance fees should receive the same treatment. For example, if the association’s policy is to send a letter to any resident who is more than ten days late in making a payment, that letter should be sent to all residents that are ten days late, even those residents that have "always" paid in the past and "won’t be a problem".
- ROCs should take immediate steps to put a resident on notice that he or she is delinquent in a payment. Each of the statutes that provide remedies to ROCs when rents, maintenance fees, or assessments are not timely paid require certain written notices to be sent to the delinquent resident and the longer the association waits to send that first notice, the longer it will take for the ROC to be able to take the legal steps needed to help collect the unpaid amounts due.
- It’s very important to find out as quickly as possible whether a lender has a secured interest in the home. The ability of a community association to successfully recover amounts due and owing from a resident may be substantially impacted by the existence of a mortgage on or security interest in the lot, home or RV. This determination should be made by the ROC manager or attorney prior to taking any legal action.
Hopefully, we’ll soon see better news on the economic front. In any event, ROC managers and board members should continue to take the appropriate steps needed to protect the financial welfare of their communities.