We are a small church in trouble with our condo association. We fell behind on our fees through a series of uncontrollable events. We made efforts to air our situation, but they chose to ignore us and demand their money. The original amount of $30,000 was in dispute from the beginning. When we found out about the debt, we collected all the money he church had, $14,000 and gave it to them. They took the money and continued to threaten us with fencing up the church to keep us out. We have been harassed, cursed out, fraudulently misrepresented to the power company which caused us to lose power on one half of church for one month. We have dealt with condo president placing his junk cars with rats, rabid animals and snakes round church building. He restores junky cars. The stress to church members is unbearable. We have no money and do intend to pay our debt, but in the mean time, we have not had any service as it leaks in our 13,000 foot facility -no service to leaking roof and the list is endless. We owe $$30,000, but they will not negoiate! Although we openly dispute the bill. They have been nasty. Do we have any recourse? We do intend to pay, provided everything is done legally when we regain our financial strength. A lawyer was consulted, but has done little to help.

I am trying to find out how to get back our home after the HOA evicted us for owing $194. Plus unreasonable attorney fees. The HOA has had possession of our home for over 2 years, have long ago cured our debt and have made alterations to our home of over $15,000.00. They have also signed two 12 month leases since that time. The 1st lease was signed in Sept 2011. There is currently a credit balance on our account and they are now threatening to try to collect the fees that we owed pre-bankruptcy 2010. We are currently in our 16th attempt to modify our mortgage and it doesn't seem that a foreclosure will happen any time soon. We need some questions answered.

I'm looking for more info on a recent blog answer citing that federal statutes protect active duty service personnel from association action to collect assessments. What, if anything, can be done if a serviceman is significantly behind in dues?

I am a trustee of a 20 unit building in Massachusetts. We have one unit that is 9 months behind in condo fees and late fees (totals about $2100). The unit owner stopped paying in Aug. 2011. I have sent delinquent letters at least every other month since then. In Jan of 2012 the unit owner's son called me to tell me that his mother, the owner, died in November and he would start making payments. This unit is rented and has been collecting rental income every month. As of April, I have yet to see any attempt to pay what is owed my condo association. I don't want to go to the expense of hiring a lawyer to put a lien on the unit, unless absolutely neccessary. How can I figure out who the lawyer is that is handling the estate? Also, what other options do I have to collect this amount?

I serve on the board of a small condo association in MA. We have found the economic times are causing nearly a third of our owners to be delinquent with their fees. We impose a late fee for any fees past 30 days. Most owners will pay up after two months. However, my question is what actions can a board take, without the use of lawyer to collect past due fees from owners that are more than 60 past due?

Most HOAs and Condo Associations have some level of difficulty collecting delinquent condo fees and assessments.  There are 3 actions a Condo Association or HOA can take to collect.

Send Notice of Demand for Collection (NOD). Although Notices of Demand are often sent by lawyers, they can be sent directly by the association. This document put the delinquent owner on notice and informs them of the HOA or Condo Association's right to place a lien on the property. 

Record Liens. Liens alert lenders, purchasers and title companies of a "cloud on title" that needs to be cleared up. For this reason, long standing delinquencies often get cleared up at refinancing or sale closings. A recorded lien improves the odds of collecting even if an owner files bankruptcy or a lender forecloses. If the lender forecloses, the association can collect if there are surplus proceeds. If there is no lien and the property is sold, the association has no claim.

Let the Attorney Handle It. After several rounds of written notices and 60 days have passed, turn the matter over to the HOA's attorney. Cease communications with the debtor. Referring all calls to the attorney will expedite the process.

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The first step can be to send a payment demand letter, which the condo association board can do themselves.  This letter put the delinquent owner on notice that the association has the right to place a lien against the condo owner after a certain amount of days.  Each state is different; make sure to look up your state's law on liens. 

Here is what is normally included in an HOA payment demand letter.  This is the most impactful, yet cost-effective way to make delinquent owners pay.  Delinquent member notified of outstanding balance and Association's right to take legal action in 30 days in the form of a lien.

• Delinquent member notified of outstanding balance and Association's right to take legal action in 30 days in the form of a lien.
• Letter also notifies delinquent owner that the association is considering a 3rd party collection option.
• Notification strongly recommends delinquent member directly rectifies outstanding debt with association prior to end of 30 day window.

See a sample HOA payment demand letter from our download section

Assessments are the life-blood of condo associations and HOAs.  Yet only in a very fortunate few condo associations can collection of assessments be left to a laissez faire process.  Most condo associations need to have a cohesive and consistent collection process to thrive and not merely survive.

This article deals not only with the process of collection of assessments, but also the philosophy of assessment collection adopted by an association. 

COLLECTION PHILOSOPHIES

Whether they realize it or not, all associations adopt a collection philosophy.  Some do it unwittingly and without realizing what they have adopted; others deliberate and consciously adopt a philosophy which tailor-fits their members and the community in which they all live.  Collection philosophies run gamut from "associations are businesses and must be like businesses" to "collections are a messy matter perhaps if left alone, the goodhearted volunteers will pay enough to cover expenses."  Most associations probably fall somewhere in the middle of the spectrum, but every association should periodically reexamine its collection philosophy.

One way of doing this is by preparing a TQM style mission statement.  A sample mission statement of collection of assessments for one condominium association might look like this:

1.                   We want to collect as close to 100% of assessments as humanely possible.

2.                   We believe in constant communication with co-owners as the cornerstone of an effective collection policy.

3.                   The collection process should provide for graduated sanctions for untimely payments.

4.                   The collection procedure must be clearly and often communicated to all co-owners before there are delinquencies.

5.                   The collection procedure must be written and made a part of the governing documents of the condominium.

6.                   The collection procedure must be enforced in a consistent and uniform basis.

7.                   Co-owners must be treated with respect throughout the collection process.

This "mission statement" is for illustration only and not to promote any particular philosophy.  But it is important for the association to look at itself and its members and put some thought into a mission statement or philosophy that both suits its members and will result in effective collection of assessments.

The centerpiece of an effective assessment process is an administrative resolution setting forth the association's policy on collection of delinquent assessments.  Enacted by the Board of Directors and promulgated to all co-owners, the administrative resolution in sometimes incorporated into the Condo Association's Rules and Regulations.  In either form, it is the association's written statement of assessment enforcement practice.  Its purpose is simple: to communicate to all owners exactly what actions the association will take to pursue delinquent assessments.

Since assessment resolutions will differ as associations' policies on assessment differ, there is no one universal resolution.  A generic assessment resolution might provide the following:

1.                   Assessments are due on the first of the month.

2.                   After a 10 day grace period, late charges apply.

3.                   A notice of Intent to Lien is sent to owners more than 30 days delinquent.

4.                   A condominium lien is recorded against any unit owner more than 45 days late.

5.                   Acceleration of all assessments to end of fiscal year (if allowed in condo documents) for delinquencies of more than 3 months.

6.                   Lien foreclosure is directed for delinquencies of more than 4 months.

7.                   After institution of lien foreclosure action, all payment plans or settlements require board approval.

What is critical is that the resolution be memorialized, enacted by the Board, disseminated to all owners, and most important, that it be timely and consistently enforced.

ENFORECMENT MECHANICS

Notice of Intent to Lien.

The Notice of Intent to Lien is normally sent to the delinquent owner by the management company or, if the Association is self-managed, by the Association Treasurer.  It serves as both a warning regarding the imminence of liening the unit and the final non-legal request for the co-owner to become current in payment of his assessments.

Lien recording.

The recording of a lien against the condominium unit is the most important action the association can take.  It secures payment of the delinquent assessments and acts as a "wake-up call" for the delinquent owner.  Because the Condominium Act sets forth strict and explicit requirements for a valid condominium lien, the preparation, recording and service of the lien is best handled by the association's legal counsel. 

The condo association and/or its management company can facilitate the lien preparation process by ensuring that each owner's unit file contain certain essential information, including: (1) Unit number; (2) Copy of the owner's deed; (3) Mailing address for owner of record (particularly if a non occupant owner); (4) tax identification number for the unit; and preferably (5) a clear unit ledger reflecting assessments, late charges and legal cost separately and identifying any payments maid by the owner as well as the current balance.  Once prepared by the lawyer for the association, the lien must be timely recorded with the county register of deeds and served on the o-owner.

Acceleration of assessments.

Some, but not all, condominium documents provide the association the right to accelerate the balance of the fiscal year's assessments in the case of default.  Where the documents do so provide, the association must consider the best way to exercise this significant power.  If the collection process is designed to provide increasing sanctions for delinquencies, the seriousness of assessment acceleration must be weighed in deciding its timing.  It is particularly essential that associations exercise acceleration of assessments on a constant basis (i.e., when a four-month delinquency exists).

Foreclosure of the condominium lien.

The most difficult decision made by an association board is directing legal counsel to begin foreclosure action on the condominium lien.  Some associations prefer to wait until a certain minimum dollar amount of delinquency has been exceeded.  This approach can create problems particularly where particular payments have been accepted.  This writer recommends foreclosure action be keyed to a specific number of months of delinquency rather than a dollar amount.

The association must also decide whether to foreclose on the condo lien or to sue for damages only in district court.  Foreclosure can be effected either by advertisement or by judicial foreclosure.  Choosing the correct enforcement mechanism requires close analysis of the factual circumstances and is best left to the discretion of the association's counsel.

Each process has advantages and disadvantages.  Foreclosure by advertisement is relatively inexpensive but does not allow the association to pursue the co-owner for damages if there is insufficient equity in the condo unit to recover all monies from the foreclosure sale.  A district court unit for damages is faster than circuit court action, but such a judgment is only as good as the collectibility of the delinquent co-owner, and such a judgment can be nullified by a bankruptcy.  Judicial foreclosure provides the most flexibility and protection to the association, but requires a lawsuit in circuit court, is expensive and time consuming.

Both judicial foreclosure and foreclosure by advertisement culminate with an advertised foreclosure sale, at which time the association normally bids in the total delinquency including legal fees, costs and interest.  If substantial equity exists, the association must instruct its counsel whether to respond to an "overbid" (i.e., a third party bid higher than the association's bid).  Throughout its process, the association and its counsel must keep diligent tabs on possible foreclosure action by the first mortgagee, bearing in mind that a first mortgagee foreclosure will "wipe out" the association's position (unless the association redeems from the mortgagee foreclosure sale).

Redemption Period.

Assuming to overbids, a foreclosure sale will produce a Clerk's Foreclosure Deed, which must be recorded at the register of deeds office, reflecting Association's ownership of the foreclosed unit, subject to the first mortgage and subject to the owner's right of redemption, which normally is six months.  During the redemption period, the Association and its counsel must frequently monitor for any foreclosure proceedings brought by the first mortgagee.  Typically if financial circumstances cause a co-owner to be unable to pay assessments, the co-owner will ultimately default on his first mortgage, and the mortgagee will pursue foreclosure by advertisement.  Often, there will be only a relatively short "window of time" within which the Association will have unit, ownership before the first mortgage sale, and the Association needs to take aggressive action to market the nit to recover its investment.

Collection of Deficiency Judgments.

In many circumstances, there is insufficient equity in a unit and foreclosure may not make financial sense.   The alternative is pursuing the co-owner for a deficiency judgment.  However associations must understand that a judgment does not automatically translate into payment.  The co-owner must be collectible and the association must affirmatively pursue collection action, by garnishment either of wages or bank accounts, or by attachment of non-exempt personal assets.  Associations are advised to take preparatory action by maintaining copies of co-owner's checks in their unit files and learning, if legally possible, employment information regarding co-owners.

CONCLUSION

Enacting a comprehensive administrative resolution on assessment collection procedure and adhering to it ion a consistent basis is the best hope for a condominium association to minimize uncollected assessments.

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