Collections is a process, and Texas prescribes much of it.
Unpaid assessments are the main threat to an association's budget, because the rest of the owners end up carrying the shortfall. Texas Property Code Chapter 209 sets steps that associations in residential subdivisions must follow before escalating. Boards that adopt a written collection policy and apply it to everyone are better protected than boards that handle each account differently.
A typical sequence
- Assessment is due. The declaration and the board's budget set the amount and due date. Owners should receive regular statements and know where and how to pay.
- Reminder and late notice. A friendly reminder first, followed by a late notice that includes any charges permitted by the governing documents.
- Payment-plan offer. Associations with more than 14 lots must adopt payment-plan guidelines with a minimum term of three months. The statute also gives limits: for example, an association is not required to offer a plan that runs longer than 18 months, to offer a plan to an owner who failed to honor a previous plan during the two years after that default, or to offer a plan after the cure period described below has expired. Guidelines must be filed in the county real property records.
- Final notice before collection-agent fees. An association may not hold an owner liable for the fees of a collection agent unless it first sends written notice by certified mail that specifies each delinquent amount and the total needed to make the account current, describes the owner's options to avoid referral, including a payment plan where applicable, and gives at least 45 days to cure.
- Attorney involvement. Fees charged to the owner must be reasonable and allowed by the documents. Boards should require itemized billing.
- Lien and foreclosure. Texas restricts foreclosure by property owners' associations. A court order is required, and an association cannot foreclose when the debt consists only of fines, attorney's fees associated with fines, or certain other charges. Foreclosure should only be considered with attorney guidance.
How payments are applied
Chapter 209 also sets the order in which a payment must be applied: first to delinquent assessments, then to current assessments, then to attorney's fees for delinquent assessments, then to other attorney's fees, then to fines, and then to other amounts. Accounting software should be configured to follow this order automatically, and your manager should confirm that it does.
What a manager can and cannot do
A management company can mail statements, track delinquencies, send reminder and late notices, calendar the statutory deadlines, collect payments and give the board a delinquency report. Decisions such as approving a payment plan beyond the policy, referring an account to an attorney or authorizing legal action belong to the board.
Reporting delinquency to the board
A good monthly package lists each delinquent account, the amount past due, the date of the last notice, whether a payment plan is in place and the next scheduled step. If delinquency is rising, the board can adjust the budget, revisit the collection policy or review how statements are delivered. Our financial management page describes the reporting we recommend.
Houston-specific considerations
- After storms, a flood or a job loss in the community, owners may need flexibility. A documented payment-plan policy lets the board help owners fairly and consistently.
- Many Houston-area owners are investors or live out of the area, so check that mailing addresses and e-mail addresses are current before notices go out.
- Condominium associations follow Chapter 82 and their declaration; ask your attorney whether Chapter 209 collection steps apply.
Related: Chapter 209 board basics and what HOA management costs in Houston.