Consistency in collections

One policy, applied the same way every time

A written collection policy only protects the association if the board actually follows it the same way for every account. The number of reminder notices before a demand letter, how long the association waits before referring a file to an attorney, and whether a hardship arrangement is available are decisions the board adopts as policy, not requirements set by statute. That flexibility is useful, but it only works if the board treats the policy as a fixed sequence for everyone, not a starting point that bends for whoever is asking.

The trade association representing community associations recommends that boards adopt a written, attorney-reviewed collection policy and treat foreclosure as a last resort. A policy that exists on paper but is not applied uniformly gives the association none of the protection that recommendation is aimed at.

Some states layer their own statutory requirements on top of the board's policy choices, for example a required order for applying partial payments or a required setting for discussing an individual owner's plan. Check your state's statute before assuming every step in the sequence is left to the board.

What consistency looks like on the ledger

Consistency is easiest to see, and easiest to break, in how payments get applied once they arrive. In states that set a mandatory order, an owner's payment must reduce the underlying assessment debt before it touches late charges, interest, or collection costs.

"[Payments] shall first be applied to the assessments owed, and, only after the assessments owed are paid in full shall the payments be applied to the fees and costs of collection, attorney's fees, late charges, or interest."

Source: California Civil Code § 5655, California Legislature, via Justia

Where a state does not mandate an order, the association can set its own in policy, but the same rule should then apply to the account of a board member's neighbor and the account of a stranger. Applying payments differently from one account to the next is exactly the kind of inconsistency that undermines a collection policy's credibility, even in a state where no statute forbids it outright.

Consistency does not mean zero flexibility

Offering a payment plan or a hardship arrangement to an owner in genuine financial difficulty is not inconsistent, as long as the same offer is available to any owner who documents a similar situation. What breaks consistency is deciding case by case, off the record, based on who is asking.

Individual payment discussions belong outside the open board meeting because they involve one owner's private finances, not because the process is secret.

"the board shall adjourn to, or meet solely in, executive session to discuss a payment plan"

Source: California Civil Code § 4935, California Legislative Information

The fact that an executive session happened is still noted in the minutes of the next open meeting, so the board is not accused of hiding decisions, only of keeping one owner's financial details out of a public record. Document every exception against a written standard so it reads as policy applied consistently, not as a favor.