HOAs usually have some discretion over how they apply payments to outstanding amounts owed—subject to the general duties to act in good faith and avoid any arbitrary or capricious conduct. Homeowners can request that payments be applied in a particular order, and an association may be willing to comply, but it does not necessarily have to.  

In specific limited scenarios, a homeowner could potentially argue that a payment application by an HOA in a manner contrary to the homeowner’s instructions amounts to misappropriation or unlawful conversion of funds—or a breach of the HOA board’s fiduciary duty.  

However, as long as the money is applied to a debt that is lawfully due and owing to the HOA from the homeowner and the payment application does not violate state law or significantly prejudice the homeowner, the argument is by no means certain of success.

Historically, partial payments have typically been applied to outstanding fees and costs first, next to interest owed, and then to principal. In a minority of states, HOA statutes mandate that associations apply partial payments according to a different order of priority.  

California, for example, requires HOAs to apportion partial payments to outstanding assessments first; then, once assessments are paid, funds can be put toward interest, late charges, and collection costs.  Cal. Civ. Code §5655(a). The order of priority under Texas’s law is delinquent assessments, current assessments, and attorney’s fees, fines, and “any other amount owed to the association.” Tex. Prop. Code §209.0063(a). 

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Step-By-Step Guide To The HOA Assessment Collections Process

When you purchase a property in a community with a homeowners’ association, you’re also acquiring the obligation to pay regular assessments. Unfortunately, though, homeowners are sometimes financially unable to pay assessments. Homeowners faced with potential collections action must understand how the HOA collections process works and the legal rights and redress available for both homeowners and the association. This guide will help all community members, including the board, resolve conflict, and avoid escalation.

HOA Fees: What Happens When Members Fail to Pay?

HOA fees are the costs assessed to all property owners for items such as lawn care, snow removal, utilities, property maintenance, common area maintenance, security and similar items.  Some of the more expensive common area maintenance items can include swimming pools and equipment that is located in a community building.  The amount and type of items that are included in HOA fees will vary depending on the nature of the property, its location, and how extensive the services are that are provided within the context of the community. 

The Service Member’s Civil Relief Act (SCRA) Applies to Homeowners' Associations

Given the sacrifices of our men and women in uniform, it is only right that the Congress passed a law in 2003 to assist military members with collections and foreclosure issues. Under the Servicemembers Civil Relief Act (SCRA), all creditors have limitations on debt collections against active duty military members. These limitations include the temporary suspension of judicial and administrative proceedings and transactions that may affect the civil rights of military members during their service. This article will examine in detail the protections afforded by the law to military members who own properties within homeowners' associations.  

Important Facts About HOA Liens & Foreclosures You Should Know

The right to record liens, and to foreclose on unpaid liens, is perhaps the most powerful tool homeowners’ associations have to enforce assessment obligations.  State HOA laws are designed to allow associations to recover unpaid fees without undue effort and expense while protecting homeowners from overly aggressive associations by requiring strict compliance with statutory procedures and ample notice to homeowners. 

Understand The Law That Protects Owners From Abusive HOA Debt Collection Practices

In 1977, Congress passed the federal Fair Debt Collection Practices Act (the “FDCPA” or “Act”) to prevent abusive, deceptive, and unfair debt collection practices by debt collectors. The act prohibits debt collectors from harassing consumers or using deceptive conduct when attempting to collect a debt. Homeowners or condominium maintenance assessments are subject to the FDCPA, therefore, the association’s debt collectors must follow the law when attempting to collect past due fees from homeowners.