An HOA assessment is a charge that owners must pay. Board members must understand who is responsible for collecting this fee, why it’s important to have an organized collection process, and what owners can do to fight them.
What are HOA Assessments?
Assessments come in two forms in an HOA or condominium: regular dues and special assessments. More often than not, the term “assessment” refers to the latter. Also known as an HOA assessment fee, this is a sum charged by an association to its owners.
But what’s the difference between condominium dues and special assessments?
Dues are the regular payments that associations collect from owners. These are paid monthly, quarterly, or annually. Regular dues cover the cost of day-to-day expenses. A portion of them can also be deposited into the reserve fund.
On the other hand, condo association assessments are additional fees that owners pay on top of regular dues. These are typically one-time fees, collected either in a lump sum or over a period of time. Associations usually impose special assessments only when necessary, such as when there’s a budget shortfall, a gap in reserves, or an emergency.
Who is Responsible for Collecting the HOA Assessment?
The responsibility for collecting monthly and special assessments in Illinois HOAs falls under the scope of the board. Oftentimes, the board hands this duty off to the association’s property management company.
Here’s a breakdown of the key players involved in the assessment collection process in Chicago condo associations.
HOA Board of Directors
The board is responsible for establishing the annual budget. Part of this exercise also includes calculating monthly assessment amounts to cover operating expenses, maintenance, and other recurring costs that impact the shared community. The board must vote on the regular dues amounts as well as vote to approve any special assessments that may be necessary for specific projects or unexpected expenses.
The board treasurer is responsible for overseeing the association’s finances and plays a key role in monitoring HOA assessment collections. Their job is to ensure that funds are accurately recorded, review financial statements, and help create financial reports that can be presented to the board and the greater community. Some association management companies also assist with these responsibilities.
Association Management Company
Once the budget has been approved, many boards choose to delegate the day-to-day collection tasks to an association management company. The company also handles other administrative tasks related to meetings, management, and financial responsibilities.
Essentially, the company acts as an intermediary between the condo unit owners and the board to ensure that assessments are collected on time. If an owner is delinquent, the association management company will communicate with them about payment due dates, delinquencies, and any applicable late fees.
How Does the HOA Assessment Collection Process Work?
The HOA assessment collection process follows a structured flow. It starts with routine billing and can escalate to legal action if dues remain unpaid. While details can vary depending on state laws and the governing documents, most associations follow the same general steps below.
1. Billing and Due Dates
The process begins with regular HOA assessment billing. Associations typically collect dues monthly, quarterly, or annually. The board sets due dates based on the budget and communicates them to owners in advance.
Owners receive their statements through mail, email, or an owner portal. These statements outline the amount due, due date, and accepted payment methods. Some associations also offer automatic payments to reduce delinquencies.
2. Grace Period
Many associations allow a short grace period after the due date. This gives owners time to pay without penalty. The length of this period depends on the governing documents or state laws.
If payment is received within this window, no late fees apply. Once the grace period ends, the account becomes delinquent.
3. Late Fees and Interest
After the grace period, the condo may impose late fees and interest. At this stage, the association usually sends a reminder or late notice. The goal is to encourage owners to settle their dues before taking further action.
4. Collection Notices
If the balance remains unpaid, the association escalates the process by sending formal collection notices. These notices often include:
- The total amount owed
- A breakdown of fees, interest, and assessments
- A deadline to pay
- Information about possible next steps
5. Payment Plans (If Allowed)
Many associations offer payment plans to help owners catch up. Condo boards should check their governing documents to see if payment plans are a required step before pursuing other actions.
6. Suspension of Privileges
If delinquency continues, the condo may suspend certain privileges. This can include access to amenities or voting rights. The authority to do this must be stated in the governing documents.
7. Collection Agency
At this point, the association often turns the account over to a collection agency or attorney. Owners must also pay the legal fees and collection costs on top of the debt. In some cases, a collection agency may even report the balance to a credit bureau, affecting the owner’s credit score.
8. Liens
If an owner still refuses to pay their debt, the condo can file a lien against the unit. A lien helps secure the debt, requiring the owner to pay it before selling the home or refinancing their mortgage.
9. Foreclosure
As a last resort, the condo may initiate foreclosure proceedings. This allows the association to recover the unpaid assessments by selling the unit. In Illinois, 765 ILCS 605/9 allows condominiums to foreclose on a lien.
10. Communication and Recordkeeping
Throughout the whole process, the board or management company should keep clear records. This includes notices, payment history, and correspondence. Consistent communication can help the HOA avoid disputes.
Tips for Keeping Payments Organized and Consistent
A clear and standard collection process is essential to maintaining consistency and fairness. Here are some tips to ensure payments are organized.
- Create a Written Collection Policy. This policy should outline deadlines, grace periods, late fees, notice timelines, and steps for escalating the issue. Of course, this policy should align with state laws and the governing documents.
- Automate Where Possible. Manual tracking creates errors. Boards should consider investing in management software that can automate billing, reminders, and other tasks.
- Enforce Deadlines Consistently. One of the biggest mistakes boards make is selective enforcement. This means applying the rules equally to all owners. For instance, don’t waive late fees for some but not others.
- Send Notices Promptly. Owners often rely on notices to remind them of their obligations. Boards should never delay sending these notices to maintain the correct timeline.
- Work With Professionals. A management company, an accountant, or a collections attorney can make the process much easier. Consider hiring professionals to lighten the board’s workload.
How to Fight a Special Assessment
Generally, owners can’t fight an HOA special assessment if it is justified, reasonable, and within the scope of the association’s authority. Owners must understand that assessments keep the community running, and it is not always a signal of poor planning.
That said, if an owner believes that an assessment is improper, they should first approach the board or manager directly. Clarify the purpose of the assessment and the board’s power to impose it. Oftentimes, a simple conversation will smooth things over.
If all else fails, owners may take legal action against the COA. Of course, lawsuits should be a last resort. They can be time-consuming and expensive, and there’s no guarantee of winning.
In the Board’s Hands
The board holds the primary responsibility for establishing and approving the HOA assessment. The actual collection process may be carried out by the board, but an association management company will often take over these responsibilities.
If you need help with any of your Chicago condo association’s daily operations or financial responsibilities, get in touch with us at First Community Management. We partner with more than 115 HOAs in the greater Chicago area on all their association management needs.