Delinquent Assessment “Acceleration” Policy Pays Off

Delinquent Assessment “Acceleration” Policy Pays Off



 

If the community you manage is considering setting an “acceleration” policy to cut down on the number of delinquent monthly assessments, make sure you know how it works. Under an acceleration policy, if a member has not paid his assessment—typically, for at least 30 days—the association has the right to declare all of that fiscal year’s monthly assessments due immediately. Although some may consider this a tough measure, its effectiveness is widely endorsed. It sends a strong message that there are repercussions for not making payments, and it reduces the number of times the association’s attorneys have to get involved. One community that adopted an acceleration policy saw its delinquency rate drop from 20 to 10 percent, and debts drop from 120 days to fewer than 60 days old.

But an association can’t just go ahead and automatically set an acceleration policy. Before adopting an acceleration policy, the association should check its declaration to see whether it has the right to accelerate assessment payments. For an association to be able to accelerate payments, the declaration must structure those assessments as an annual expense that’s paid in increments (for practical purposes, usually monthly increments). This is because what the association is accelerating is the time frame within which the annual expense is due. Many associations designate the assessments as monthly dues or monthly maintenance fees, which limits the association’s flexibility. Since an association cannot legally force a member to pay a monthly expense months before it’s due, assessments structured this way cannot be accelerated unless the association amends its declaration.

The ideal language that would give the association the right to accelerate assessment payments would be: “The board shall levy an annual common expense assessment, which members shall be obligated to pay in such increments as the board shall determine.” If an association’s declaration structures assessments as a monthly fee, it can still adopt an acceleration policy, but first it will have to amend the declaration to structure assessments as an annual fee. 

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