How to Make Sure Your Homeowners Association Stays Solvent

Private Property South Africa
Press

)Although they are not legally the same as sectional title bodies corporate, the Homeowners’ Associations (HOAs) that run cluster and estate developments have at least one thing in common with them: the need for funds. “Money is required to pay for the upkeep of communal gardens, roadways and other facilities, for the maintenance of security equipment and services and for the establishment of a reserve fund,” notes Berry Everitt, CEO of the Chas Everitt International property group. “And these funds can only be derived from the levies or assessments paid by the homeowners in the estate, so HOA management committees need to put correct collection policies and procedures in place at the outset.” Writing in the Property Signposts newsletter, he says the first thing the management committee needs to do is establish an accurate bookkeeping system. “Whether this is operated by the HOA itself or by a hired property manager, it is extremely important for payments to be accurately and promptly recorded as failure to do so will undermine the HOA’s right and ability to collect delinquencies.” Secondly, the HOA should formulate and formally approve a comprehensive late payment policy that encourages the timely payment of assessments, sets penalties for late payment and allows for payment plans in cases of genuine financial distress. In addition, this policy must be uniformly and strictly imposed. For example, written delinquency notices or legal demands to pay must be sent or delivered according to schedule (regardless of what an owner may promise by phone) to maintain the HOA’s legal rights. “The longer the HOA waits, the more difficult collections get. Failure to process delinquencies promptly gives the impression that the policy is meaningless or that enforcement depends on "who you are". Also, if an owner is truly in financial trouble, the chances of repossession or liquidation increase daily and can seriously reduce the possibility of the HOA recovering any of the money owed to it,” says Everitt. “Meanwhile, it is worth noting that those who fail to pay their levies are not only putting an unfair burden on those who do pay, but damaging their own prospects because any maintenance and upkeep that has to be deferred for lack of funds affects the value of all homes in the development.”

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