Since the lifeblood of timeshare homeowners associations (HOAs) is the maintenance fee receivables, it is vitally important to the health and future of the HOA for owners to stay current with these payments. Closely monitoring this aspect of HOA management helps ensure budgets set forth can be met, the resort or property is maintained at a proper level and that owners remain happy.

Managing for excellence
Boards and management companies must work together to create a realistic budget for the resort based on the association’s collection history. This will help ensure the association does not overspend and that budgets are as close to actual receivables as possible.

“When budgeting, we look at multiple years of an association’s collection history to set a collection ratio,” said Bill Young, president and chief operating officer at SPM Resorts. “Next, we look at the economy to determine if there will be any expected drop in collections. Lastly, we look at sales to determine an average number of new maintenance fee-paying owners that will be added to the association. All of these items help us to make a realistic budget based on historical information.”

It is also important for the maintenance fee statements to be sent as early as the bylaws allow.

“In our experience, sending maintenance fee statements earlier rather than later creates more opportunities for an owner to send in the payment before the due date,” said Lani Liber, senior vice president of corporate operations for SPM Resorts. “If an owner receives the billing statement in October rather than on November 22, they are much more likely to have the money available to pay the bill. Otherwise, the maintenance fee statement gets lost in the shuffle of the holidays and the other bills and solicitations that come at the end of the year.”

The board and management company can encourage more timely payments from owners by communicating with them on a regular basis. It is important for owners to understand that each non-paying owner puts a cumbersome and unfair burden on the paying owners, and if that money is not paid, the resort ma y fall short in their budget. If owners are communicated with on a regular basis throughout the year and know when to expect their bill, they are less likely to be surprised and more likely to pay the bill. Setting expectations is important.

Other things management companies can do to ensure collection success for their associations may include:

Creating a pre-payment program for owners. While payment plans after the billing statement has gone out can become very difficult to manage, can make the money come in slower, and is not considered to be a general best practice, consider encouraging owners to create an advance payment plan. This type of option allows owners to begin paying the next year’s maintenance fees before the statement is even mailed. When owners are billed, they may have either very little or no money due because it has already been paid. Advance payment plans also help owners budget their finances in a way that makes the total maintenance fee more manageable because it is broken up over several payments. Owners can establish this type of payment plan for themselves by setting up automatic drafts or automatic payments through their banking institution or online banking platform.

Having an accurate database. Having an accurate database is of utmost importance not only for collection purposes, but for other owner communication, as well. If address changes are a problem, run the database through the National Change of Address database to receive the most up-to-date address changes for your owners. It is vitally important to collect email addresses for owners whenever possible. Email addresses help ensure accurate contact methods for owners, as well as reduce overall printing and mailing costs to owners. An accurate database is also important once accounts are turned to collection agencies – it not only helps the management company track the accounts appropriately, but helps the agency be more successful in contacting and reaching account owners.

Producing an accurate and readable statement. Send owners a statement that is easy to read and clearly points out the acceptable methods of payment and the due date. Also, make payment as simple as possible. Offer owners the opportunity make a payment in multiple ways – mail a check, pay by phone, pay online or perhaps even set up auto-pay through their own bank.

Following up in a timely manner. If an owner misses the initial due date, very quickly send a notice and give them another opportunity to pay before additional fees accrue or before the account is turned to a collection agency. If the maintenance fee statement is sent early, this late notice will still go out with plenty of time before the end of the year.

When all else fails
When internal efforts have been made to contact an owner and they still do not pay the maintenance fee, it may be time to turn the account over to a collection agency that specializes in timeshare collections.

“Using an agency that understands the timeshare industry is important because they need to understand the inventory, the product and what our owners actually own,” said Liber.

Margaret Eardley, chief operating officer of Pinnacle Recovery, agrees. “Typically, management companies are not set up to handle the default collections process,” she said. “We find that in-house collection efforts are more of a customer service effort. It is difficult to make that leap internally from being customer service-oriented to being a little more firm handed.”

“We believe that collecting on defaulted accounts is really about reselling the owner on or reminding them of why they purchased the timeshare in the first place,” said Eardley.

But how do the agencies resell this idea? According to Eardley, “Any information management companies can provide to the agency – photos of the resorts, information about updates that have occurred during the year, capital changes, newsletters – all of these things help us to be better equipped in answering the owners’ questions. We are able to share information with them that reminds them of why they purchased in the first place.”

Changing times take changing measures
In light of the changes in the economy during the past few years, many HOAs have found themselves in difficult situations with defaulted accounts. Collection attempts have become more challenging.

“If someone can’t make a house payment, they certainly aren’t going to pay for their timeshare payment,” said Eardley. “In this economy, flexibility for payment options has become a major tenet of success in business. Additionally, flexibility is needed in regards to severely delinquent accounts. If management companies can provide the collection agency with settlement parameters that make it more feasible for the owner to pay off their debt, they are more likely to do so,” said Eardley. “For an owner who is five years delinquent, this might include waiving the oldest two years of debt and only focusing on collecting the most recent three.”

While the economy does seem to be making a turn for the better, the act of collections will always be an important business matter for HOAs and management companies. Having a proactive and established plan in place utilizing some of these ideas and tactics to help recover some of these fees ensures the resort will be in good standing for many years to come, and that keeps owners happy.