When a community owner doesn’t make his monthly assessment payment, he harms the entire community. Every association relies on its owners to make monthly payments so that it can pay for the services and amenities its owners expect. One strategy you can use to cut delinquencies is adopting an “acceleration” policy. It works like this: If an owner hasn’t paid his assessment – typically, for at least 90 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 undisputed.
Before you adopt an acceleration policy, check the language of your declaration to see if your association has the right to accelerate assessment payments. In order for your association to accelerate assessments, the declaration must structure assessments as annual expense that’s paid in increments (usually monthly increments). The reason being, you are accelerating the time frame for when the annual expense is due.
If your declaration structures assessments as a monthly fee, you can only accelerate after you amend the declaration to structure assessments as an annual fee.
The language of your acceleration policy should:
Explain what triggers acceleration.
Acceleration policies must explain what events will trigger acceleration. For most associations, the trigger will be the failure to make a monthly payment after a period of time – typically, 60 to 90 days.
Give board discretion in deciding whether or not to accelerate.
Though you should establish clear guidelines for what triggers acceleration, it’s also smart to give the board discretion to decide whether to actually accelerate in each individual case. Just because an owner has been chronically late with payments shouldn’t compel the board to accelerate his debt. For example, if the owner is on the verge of bankruptcy, the association might decide not to push him over the brink by accelerating his payments. That wouldn’t necessarily help either the association or the owner. Another time the association might choose not to accelerate assessments is toward the end of a fiscal year, when only a month or two of assessments would become immediately due.
Set notice requirements.
Your association should give the delinquent owner notice before accelerating monthly payments.
Give association the right to “decelerate” the debt.
One of the most important things to include in your acceleration policy is the association’s right to “decelerate” the debt after it has been accelerated. Deceleration is very important if an owner files bankruptcy or if there is a foreclosure.
Click here to download our recommended collection policy which contains an acceleration provision.
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