HOA Collections Policy: How to Write One, What It Must Include, and Why Every Board Needs One

A collections policy is a written document that tells owners — in advance — exactly what will happen if they don't pay their assessments. It must be adopted by the board, distributed to all owners, and consistently followed. Without one, every collections decision the board makes is potentially arbitrary and vulnerable to a selective enforcement challenge. With one, the board is protected: it's just following the published policy.

States That Require a Written Collections Policy

California (Civ. Code § 5310), Nevada (NRS 116), and Colorado (CCIOA) explicitly require associations to adopt and distribute a written collections policy. Most UCIOA states encourage it as part of the governing documents package. Even where not legally required, virtually every HOA attorney recommends a written policy as basic governance hygiene.

Required Elements of a Collections Policy

• When assessments are due and when they become late
• Late fee amount and when it is charged
• Interest rate on delinquent balances (if any)
• The notice sequence before a lien is recorded (step 1, step 2, etc.)
• When the account is referred to collection counsel
• Whether and how the association will consider payment plans (required in CA)
• Whether the association will report to credit bureaus (some do)
• What expenses (attorney fees, recording costs) are added to the delinquency
• The foreclosure threshold — when the association will initiate foreclosure
• How the policy applies to all owners equally (no exceptions without board resolution)

How to Adopt the Policy

The collections policy is adopted by board resolution — not an owner vote. The board approves the policy at a board meeting, documents the adoption in the meeting minutes, and then distributes the policy to all owners. California requires distribution to all owners at least 30 days before the policy takes effect. The policy should also be included in the new owner welcome package.

Payment Plans: Required in California

California Civil Code § 5665 requires associations to offer a payment plan to any owner who requests one before a lien is recorded. The plan can require payment of no more than 1/12 of the total delinquency per month. Associations that fail to offer a payment plan when requested before filing a lien have a defective lien that can be challenged. All other states: a payment plan policy is best practice even where not required.