Payment Plan

An arrangement between the association and a delinquent homeowner that allows the homeowner to pay off their outstanding balance in installments over an agreed-upon period while continuing to pay current assessments as they come due. In California, Civil Code Section 5665 requires the association to offer a payment plan to any owner who owes a past-due assessment before the association may record a lien against the property. The payment plan must allow the owner to pay in installments over at least 12 months. This is a significant procedural requirement — failure to offer the payment plan can invalidate a subsequently recorded lien. Payment plans typically address the total amount owed (including assessments, late fees, interest, and collection costs), the monthly installment amount, the duration of the plan (commonly 6 to 18 months), whether late fees and interest continue to accrue during the plan, and the consequences of defaulting on the plan. The plan should be documented in a written agreement signed by both parties. Boards should ensure the payment plan is reasonable — setting installments so high that the owner cannot realistically comply defeats the purpose. If the owner defaults on the plan, the association may resume collection efforts, including recording a lien. Payment plans are a practical alternative to aggressive collection that preserves the relationship with the homeowner, reduces legal costs, and still ensures the association recovers the funds owed. Many management companies track payment plan compliance through their accounting software and alert the board to any defaults.