The Carrot Approach to Collecting Assessments

Association attorneys can talk all day long about the “stick” approach to collecting delinquent assessments, because that’s what we do – we get involved after a delinquency already exists. However, the “carrot” approach to collecting assessments – essentially preventing or at least reducing delinquencies – is equally important and can save associations a lot of time and money spent trying to collect delinquent dues.

The first way an association can adopt the carrot approach is to educate and inform your owners about the reasons behind a particular budget decision. Are you raising the dues? Educate your owners as to why. Considering a special assessment? Hold an association meeting to discuss the reasons for the special assessment with your owners. Well-informed owners are far more likely to pay both regular and special assessments than owners who feel like they are being “taken for a ride.”

The next piece of the carrot approach is to make paying assessments as easy as possible for your owners. Some ideas include:

  • Have the option of automatic withdrawal for monthly dues;
  • Have a drop box on the property where owners can put their monthly payments;
  • Use payment coupons so owners have a concrete reminder they can see.

Next, consider somewhat unusual strategies that encourage payment and even pre-payment of dues. For example, at your annual budget meeting, discuss the idea of offering prepayment incentives, such that owners who prepay their dues for a year in advance can receive a “rebate” or “discount” of 5%. Or, offer prizes for on-time payment of dues or for pre-payment. You might purchase raffle prizes and give all owners who pay that month’s dues on time the opportunity to win a prize. A more valuable prize, such as a free round-trip plane ticket or a free annual gym membership might be a tantalizing incentive for owners who can pre-pay their dues a year in advance.

Finally, consider offering “amnesty” from penalties under certain circumstances to reduce a high delinquency rate. An association with 200 units with a 25% delinquency rate, for example, might offer that for a period of 60 days, all delinquent owners who pay their accounts in full may receive a one-time forgiveness of all accrued late fees and interest charges. We have heard of at least one association that successfully reduced their delinquency rate as a direct result of an “amnesty” program.

Collecting assessments on time is (Captain Obvious alert!) much easier than collecting delinquent assessments. Associations should employ all strategies available to them to educate owners and make paying assessments easy and convenient.

If you have any questions we can answer, please feel free to leave a comment or contact us directly. We look forward to continuing this conversation with you in our future posts!