Academy/Collections & Delinquencies
Building a collection policy
The one document that decides whether your board's collection process is fair, predictable, and defensible, or made up on the spot every time.
A collection policy is a single written document, adopted by the board, that says in advance exactly what happens when an assessment goes unpaid: how many reminders go out, when a late fee applies, when a file moves to the association's attorney, and when a lien gets recorded. Adopt it once, then apply it the same way to every account.
What a collection policy actually is
A collection policy is not the same thing as your declaration or your state's statute. Those set the outer limits: what a late fee can be, how a lien attaches, whether foreclosure needs a judge's signature. The policy is what the board adopts to fill in what's left inside those limits, the actual sequence of steps a manager follows on every delinquent account, in the same order, every time.
Written down, it turns "we'll figure it out when it happens" into a document a manager can follow without calling a director for every decision, and one that any owner, or their attorney, can ask to see.
What it has to answer
A usable policy answers a short list of questions before the first payment is ever missed: how many reminder notices go out and how far apart, at what point a formal demand letter goes out, whether and how a payment plan is offered, who decides a hardship request and how, at what balance or age an account moves to an attorney or collection agency, and when the board authorizes a lien.
One of those decisions matters more than it looks: the moment a file moves from the board or manager to an outside collector or attorney, federal debt-collection rules can start to apply that did not apply before. The Fair Debt Collection Practices Act defines a covered "debt collector" by whose debt is being collected, not by how politely it's done.
"any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another"
Source: Fair Debt Collection Practices Act, 15 U.S.C. § 1692a(6), Cornell Legal Information Institute
Whether your board, your manager, or your attorney counts as a "debt collector" under that definition, and what state-level rules stack on top of it, varies by who is doing the collecting and by state law. See Fair Debt Collection Practices Act considerations for what changes once a third party is involved.
Who adopts it, and why consistency is the whole point
The board adopts the policy, typically by resolution, and most practitioners recommend having the association's attorney review it before adoption, since it has to operate inside your state's statute and your own declaration, not around them. The trade organization representing community associations has taken the public position that boards should adopt a written collection policy, have it reviewed by counsel, and treat foreclosure as a last resort rather than a routine step.
Once adopted, the policy's value comes entirely from applying it the same way to every delinquent account. A board that waives a late fee for one owner and not another, without a documented reason under the policy itself such as an approved hardship arrangement, has not simply done a favor. It has made the policy meaningless the next time it's disputed. See Consistency in collections for what that looks like in practice.
Check yourself
Answer before you read the explanation, recalling it is what makes it stick.
A director quietly waives a late fee for a neighbor going through a hard time, without documenting a reason or offering the same option to anyone else. What's the actual problem?
A board sends its own reminder letters under the association's name, then hands a stalled account to its attorney, who sends a demand letter. Which statement is accurate?
The board wants a collection policy provision that conflicts with a cap set by state statute. What happens?
Sources
- Fair Debt Collection Practices Act, 15 U.S.C. § 1692a(6), Cornell Legal Information Institute
- Public policy statements on effective collection of assessments, Community Associations Institute
Collections & Delinquencies
Next, turn this policy into an actual number: see Late fees to set your first concrete trigger.
What a collection policy may and must contain, required notices before a late fee or demand letter, and whether a third party's involvement triggers extra disclosure rules, varies by state statute and by your own declaration and bylaws.