For instance, the policy and procedures can and should provide for the following:
· Payment due date and grace period;
· When a “reminder” or demand letter will be sent to a member who has fallen behind;
· When the matter will be turned over to provide that when a members falls two months behind, the matter is turned over to the community association’s legal counsel;
· When a lien will be recorded;
· Whether the Association will pursue collection from a tenant in the condominium unit (as provided in the Michigan Condominium Act);
· How payments will be applied (i.e., first to legal fees and costs incurred, then to late charges/interest, and then to assessments in order of greatest delinquency).
The collection policy and procedures should be systematically followed, and the members should be aware of them. The further a member falls behind, the bigger the debt becomes, and the more difficult it will be to collect what is due and bring that account current. Thus, minimizing delinquencies and promptly taking action in accordance with a collection policy is critical because the association’s cash flow will be significantly impacted if there are too many members who are substantially behind. Remember, a community association is technically a non-profit corporation and although the members may be your next-door- neighbors, sound business practices should be followed in running the association’s financial affairs. An experienced community association attorney should be able to assist the association in drafting and adopting a good collection policy.