A few months ago, Florida passed new laws that give our condominiums the power to restrict non-paying owners (and their guests and tenants) from using the common elements of the property. This includes facilities like pools, exercise rooms and other amenities that go hand in hand with living in a shared ownership community. I’ve written several blogs on collections which can be found at the old New Neighborhoods blog site here, here and here.
At the time, the addition of a “common element ban” was hotly debated, with opponents arguing that the new law would not work, could not be enforced, would give boards too much power and would be abusive to renters. Proponents, including myself, argued that a worthwhile stick was needed to convince deadbeat owners to pay their common bills, and the threat of foreclosure alone was insufficient to motivate owners to pay. Foreclosures, while the ultimate recourse, take many months to process, and in the meantime the unpaid debt that is being covered by paying, compliant owners can become exorbitant. Those of you in HOAs may not see much of a problem as your dues are normally pretty low, but in condominiums the problem is far more severe.
In the summer of this year, just before the new laws went into effect, the board of my own condominium, a very large, 240 unit luxury property, decided to prepare a comprehensive collections strategy including strict adherence with a total common elements ban. Since then, any owner more than 90 days overdue has been barred from using the common elements, and their use rights are not restored until their debt is paid in full.
The results? We started with an accounts receiveable of between $350,000-$400,000, with much of that debt dating back for months or even years. In the 3 months since the new laws were passed, we have collected nearly $100,000 of that amount, most from owners for whom the ban was a crucial factor.
So while we can debate the pros and cons of such a rule into infinity, as results go (at least in my own community) they are clear–the common element ban has been an extremely effective method of motivating owners to remain current on their maintenance obligation. If the laws in your state permit such a ban, I would strongly recommend it be considered as part of a larger collections policy.