Collection Policy

A written document adopted by the board that outlines the procedures the association follows when homeowners fail to pay assessments or other charges. In California, Civil Code Section 5310 requires every association to adopt and distribute a collection policy, and it must be included in the annual policy statement provided to all members. A well-drafted collection policy specifies the grace period after the due date (commonly 10 to 15 days), the late fee amount (capped at 10% of the delinquent assessment under Civil Code Section 5650(b)(2)), the interest rate on unpaid balances (up to 12% annually under CC 5650(b)(3)), the timeline for sending delinquency notices, the pre-lien notice procedures (30 days advance notice per CC 5660), and the criteria for referring accounts to an attorney or collection agency. The policy must also describe the owner's right to request a payment plan before the association records a lien, and it must reference the owner's right to internal dispute resolution (IDR) and alternative dispute resolution (ADR). Boards should apply the collection policy consistently and uniformly to all homeowners — selective enforcement can expose the association to discrimination claims and undermine the board's credibility. The policy should be reviewed annually by the board and legal counsel to ensure it complies with current law, and any amendments must be distributed to the membership. A clear, fair, and consistently enforced collection policy is one of the most effective tools for maintaining the association's financial health.