Q. Recently, our association started more aggressive collections efforts and we received several requests from owners for payment plans. Our board is hesitant to agree to payment plans because of the uncertainty of payment and is also unsure what leverage the association has to ensure payment. In your experience, is it a good idea for a condo or homeowners association to accept payment plans for delinquencies?
A. The answer to your question changes with the economy and also depends on other circumstances that are special to your community. When the economy was better, the association had little motivation to accept payment plans because the association’s lien truly gave the association some leverage. Further, if there is equity in the delinquent property, the association should almost never accept a payment plan because a lien foreclosure against that property will probably get the association paid in full. In the vast majority of other cases, however, the association’s lien is often behind a first mortgage lien that substantially exceeds the property value. On these “under water” properties, a payment plan should be considered in select cases with the assistance of legal counsel. We generally do not advise our clients to accept a payment plan unless the delinquent owner agrees to: a) pay a significant portion of the balance as a down payment; b) pay the balance of the arrearage owed in six to twelve months; and c) pay future maintenance fees in a timely fashion. Also, to gain additional leverage, the association should consider accelerating the maintenance fees for the rest of the year before any payment plan for the arrearage is considered.