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A co-op’s options when a member stops paying assessments

Every co-op and homeowners’ association (HOA) in the Detroit area depends on its members’ assessment fees to stay financially solvent. Without this vital revenue stream, most associations will quickly run out of money for routine maintenance like lawn mowing, snow shoveling and cleaning of common areas. Not to mention expensive, necessary repairs when they arise, such as replacing the roof or repaving the parking lot.

So when a resident falls behind on their assessment payments, it can be a cause for alarm. Fortunately, HOA boards usually have options for getting the money the resident promised to pay as part of the HOA’s governing documents when they bought into the co-op. These include obtaining a lien on the property, suing the owner and foreclosure.

Debt collection laws apply

Association dues are legally considered to be debts. When a property owner who is part of an HOA fails to pay, Michigan law allows the HOA to pursue compensation similarly to a credit card company with a customer who has not kept up on their payments. Keep in mind that the HOA’s efforts to collect association fees must be consistent with its governing documents. For example, if the documents say that the HOA is prohibited from placing a lien on a property to recoup fees, then the HOA cannot do so.

Because an association fee is a debt, the property owners who pay them are technically “consumers” protected by state and federal laws against unfair debt collection practices. HOAs must be careful not to violate those laws when contacting the property owner or pursuing payment.

Legal action is generally a last resort but must be an option to stop homeowners from not living up to their financial obligations. Consulting an attorney can help an HOA decide on the best course of action.