A Soon To Be State Law May Do More Harm Than Good Steven Shuey, PCAM, CCAM
Homeowner Associations exist in common interest developments to manage the community. This management includes providing for the maintenance of the common areas as well as administration. In many communities, this can mean thousands of dollars per month in regular monthly costs.
Associations pay their monthly bills with funds collected from owners through maintenance assessments, also known as a maintenance fee or dues. Without this regular recurring income, funds would not be available to meet the association’s obligations.
Occasionally, there are owners who, for whatever reason, cannot or will not pay their maintenance fee on time. This, of course, can present a problem for the association if it happens very much. Associations must take measures to prevent this. If a few owners are allowed to withhold their maintenance fee for any length of time, the remaining owners will need to carry the load. This can mean increasing the fees for everyone in the association so that enough money will be on hand to pay the association’s bills when they come due.
Associations have policies regarding payment of the maintenance assessment. In most cases the fee is monthly and in other cases it can be quarterly or annually. The collection policy, adopted by most associations calls for the payment to be due on the first of the month and late if not paid within 15 days.
In order that pressure can be applied to a late paying owner, a late penalty is applied if the payment is not received on time. This is usually 10% or $10, which ever is greater. This means that for an association with a maintenance fee of $300, the late penalty could be $30; if the regular fee is $600, the late penalty could be $60. This is a pretty good incentive to pay on time, but actually, it is not enough.
Typically, if a maintenance fee goes unpaid for three months, a recorded lien is placed on the property. If the fee still remains unpaid, the property could be foreclosed upon. There are in place comprehensive protections for the consumer relative to maintenance assessment collections including extensive notification, payment plans and wait periods. Rarely does a property go all the way to foreclosure, but having the ability to do so puts enough pressure on the owner to keep the maintenance fees paid current.
In recently proposed legislation, specifically, AB2598, some of these protections will be altered or taken away to such a degree that some associations will have financial hardship if the legislation goes into law. These maintenance assessments are the lifeline of homeowners associations. If the strength to enforce on time payment is taken away, it stands to reason that the maintenance fees will go up for everyone. Let’s hope the governor does not sign the bill into law. Action on this bill is expected shortly.
Homeowners in communities are encouraged to be involved in the governance of the community. It is important to take an active role if we want our communities to continue to thrive and survive. For more information check out www.ResponsibleNeighbors.com.
Steven Shuey is a Certified Community Association Manager (PCAM, CCAM), General Manager of the Desert Island Condominium Community and past president of the Coachella Valley Chapter of the CAI.