HOA statements: 5 things to know

Date Published : Oct-23-2020

Written By : Phillip Livingston


Owners who belong to an HOA enjoy a multitude of perks and benefits, however these things don’t come for free.
The association makes decisions about and pays for things like maintaining common areas (pools, clubhouses, gyms), cleaning, landscaping for shared spaces, and repairs for equipment and parking lots. However, in return for general maintenance and shared services, the HOA will typically assess regular fees (usually referred to as dues), and send owners invoices or statements. In rare cases, if HOA reserves are running low, owners may also receive notice of a special, additional fee assessment, but we’ll address towards the end of this article.

Click here to download our HOA statement template

 

What is an HOA statement?

An HOA statement, or an accounts receivable statement, is a document that details the outstanding charges that an owner must pay to the association. Fees can be owing from sources such as overdue assessments, vendor credits, late fees, or any other outstanding source of income.
If you are a property manager, you will want to make sure that statements have been made for each owner. This allows you to see the grand total of overdue funds, which in turn helps with budgeting. Knowing how much money should be available to the association, and being able to determine if most owners are paying dues on time, will be valuable when making both short-term and long-term financial plans. If you see that too many owners are not paying on time, you can create a plan or policy to correct that behaviour as soon as possible to ensure the HOA remains in good financial health. Furthermore, having access to a comprehensive list of statements allows anyone who is working in collections to do their job more effectively and efficiently.
Some associations even detail which accounts are 30 days, 60 days, and over 90 days past due. Like any financial statement, the more detail you provide, the easier it is for everyone to analyze and follow.

 

5 things to know about HOA statements  

Most HOAs will be familiar with statements, but we’ve outlined a few important points about this document that you’ll want to know.


1. Statements aren’t always the same
While statements will generally look the same for owners, the fees owning won’t always total to the exact same amount. Dues can change over time (in fact they almost certainly will) when big projects need funding, or simply because of inflation. As such, it can be helpful to have accounting software that will do the calculations for you. With this sort of software, you can easily adjust recurring fees, and quickly update statements for something like a special assessment.


2. If owners ignore statements, the HOA can take action
It won’t happen often, but there may come a time when an owner won’t pay the fees that they owe. Perhaps they will delete or throw away their statement because they don’t agree with a change in dues, or, they may have recently lost their job and are struggling to make ends meet. Whatever the case may be, there are consequences for avoiding payments.
The association has a right to charge a late fee to owners who do not pay on time, and it can eventually send delinquent accounts to collections. An HOA can also put a lien on an owner’s property in some cases. The steps you can take to collect late dues depends on where you live, and the HOA’s governing documents; make sure you understand what is and what’s not allowed before you take formal action, and encourage your homeowners to speak with you if they are struggling financially. It will be better (and less adversarial) for both parties to try and work out a payment plan together.


3. Statements can be sent out on a monthly basis
Each homeowner typically pays HOA fees on a monthly basis. Dues go toward regular expenses, as well as the association’s reserve fund. As such, it is recommended that statements be sent out to homeowners every month as well. This way, they are more likely to get in the habit of paying dues around the same time each month, kind of like a phone or internet bill.


4. Detailed statements help minimize disputes
Statements can be delivered electronically or by mail (provided your association allows you to send documents electronically), and should include the following information:

  • The name and address of the sender
  • The name and address of the recipient
  • The statement date
  • The date that payment is due
  • An account number
  • The recipient’s total balance
  • A description of fees
  • A record of the last payment received

Another item you may consider including in this document is a “late fee warning.” This would be a little disclaimer that would let the owner know that if a payment is not received by a specific date, then a late fee of $25, for example, will be applied to the owner’s next statement. Check with your association’s governing documents to see if there is a section that addresses late fees.
Make sure that it is clear to owners that the warning is not meant to say that they owe a late fee; you are simply making them aware of the policies in place in your association with regards to late payments.


5. It is possible to automate the payment process
Sending digital statements is faster, easier, and less expensive than mailing or delivering paper statements. Many discrepancies stem from mailed statements because any payment activity after the invoice date will not show up until the following month’s statement. That means if an owner has made a payment after the statement was sent out to them, they won’t see the payment reflected in the current statement.

Electronic statements can easily be updated, and don’t need to be sent out quite as early as paper statements. They tend to represent a more accurate picture of what owners owe.
In addition to sending electronic statements, providing owners with a personal account where they can see an up-to-date balance can help to minimize confusion and help them stay on top of any dues or fees that they owe.
If your association uses online payments (Stripe, Rotessa, QuickBooks), you should be able to give owners the option to have monthly dues automatically withdrawn from their bank accounts or credit cards. Setting up automatic payments means owners never have to worry about paying late, and the association receives payments as quickly as possible. Automatic payments are so much easier, and much more secure than cheques or cash. Instead of tracking down payments from owners and having to make regular trips to the bank, the program does all of the heavy lifting for you.

 

Other types of HOA statements

In addition to statements for regular dues, owners may, from time to time, receive an HOA statement with a special assessment on it. A special assessment is an unplanned payment or levy that an HOA board has to impose on homeowners. Special assessments can be pricey depending on what the payment is for. It may be levied because of an increase in insurance, an emergency repair, or even a natural disaster. Because special assessments can put owners in a tough financial situation, HOAs use them as a last resort. While boards understand how much of a financial burden they can place on owners, assessments are sometimes the most practical solution.
Owners will receive a notice before a statement for a special assessment is given to them.
Not all statements document the account balances of owners. A comprehensive annual statement from the HOA will detail the association’s financial activity during the year. This statement should be sent to each owner so that they have a clear picture of the association’s financial health. Owners will want to look at the statement of revenue and expenses. This shows actual revenue and expense figures. This document makes it simple to compare the budget to actual costs, and assess the accuracy of the budget. They will also want to review the balance sheet, which summarizes the HOA’s debts. Similarly, it summarizes what the association owes, grouped into liabilities (usually unpaid bills), and shows the association’s fund balance (net assets left after all expenses and liabilities have been deducted), and the amount that it increased or decreased based on the net results as shown in the statement of revenue and expenses. Owners will also be interested in the statement of changes in fund balance. This document will detail how much money the HOA brought in from association fees, and how the fees were spent.

 

Conclusion

Statements detail the outstanding charges that an owner must pay to an HOA. While most statements show regular dues, on rare occasions, they may include fees for special assessments. Owners have an obligation to pay their dues, and they could face serious repercussions if they avoid making payments.
Detailed statements are helpful to both property managers and owners. They keep everyone on the same page, and like monthly bills, they act as a helpful reminder to owners to pay their fees on time.

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