While all homeowners have the responsibility to pay monthly assessments, some tend to miss payment deadlines. As a member of the homeowners association (HOA), you need to collect these fees to maintain the common areas of the subdivision.
Creating a payment plan can be a viable option for helping homeowners settle their debts. Understanding how this works under Texas law can assist you and your association in implementing it with confidence.
Understanding statutes on payment plans
In Texas, HOAs that manage more than 14 lots must establish a reasonable payment plan for homeowners to repay their delinquent debts. While this is a requirement, an HOA is not required to offer a payment plan if a homeowner meets any of these factors:
- The plan will last longer than 18 months from the date of the request.
- The homeowner defaulted on a previous plan in the past two years.
- The homeowner had more than one plan within the past year.
- The homeowner did not settle their debt within 45 days after receiving a notice.
If a homeowner is clear of these restrictions, they may be eligible to pay their assessments in installments without incurring additional fines.
Structuring a fair and effective payment plan
When drafting a fair payment plan, consider adding the following in the agreement:
- Require the homeowner to submit a formal request to help you document the process.
- Define the length of the period time and the installment amount each month.
- Decide whether to add interest or late charges to the outstanding balance.
- Outline the specific consequences of defaulting on the payment plan.
By law, you must file your payment plan guidelines with the real property records of your subdivision’s county.
Establishing a cooperative community
Offering payment plans to homeowners can assist them in settling their debts. However, when settling on a plan, it is important to establish their responsibilities to avoid penalties. If you need further guidance on the matter, consider seeking legal advice to assess whether your payment plans comply with Texas statutes.