Posted on Thu, Aug 26, 2010 @ 08:15 AM
I am the president of my condo association, and am dealing with a difficult situation. Our condo association has a high delinquency rate. We are a 150-unit property with over 40 homeowners behind in assessments. In total, in arrears is about $100,000. Earlier this year, the board voted to reassign the delinquent owners' spaces to visitors spaces, per our a provision in our bylaws. Residents can still park in front of their homes, but being that their spaces are now marked "Visitor", their spaces are fair game. This action lit a fire under some homeowners to start working out payment arrangements. Per our bylaws, once a delinquent homeowner has paid at least 50% of the amount owned, his/her parking assignment(s) will be restored. Most homeowners, while upset about this, respect the rules and regulations and are working on paying down their delinquencies.
However, we have one owner -- an incredibly rude and defiant woman -- who owes over $8,000 (the most of any owner) and she refuses to abide by the rules. We've had her space spray painted at least three times because she goes and spray paints it back. When we talk to her about it, she lashes out with all kinds of irrational talk and profanity. She said she's not working and is on disability and she knows we can't do anything to her, so she feels she is justified in taking her space back. Yet those who owe less than her are forced to deal with the situation. This woman comes to board meetings terrorizing us with all kinds of demands for work she says needs to be done in and around her unit. Yet we haven't see a payment from her since 2005. We got a judgment against her last year. And when we attempted to file a lien against her, she scrambled to make an effort to pay. We were fooled. The condo attorney is slow-moving on this issue and just refiled the lien 2 months ago. There was a "show cause" hearing last week, and the woman claimed she is on disability and babysits occasionally. Meanwhile, she drives a 2008 Lexus. She's living off of something, but what we don't know. We feel like our hands are tied and this woman is holding us hostage. She said she knows we can't do anything to her because we can't garnish her disability payment. We are looking at possibly pursuing a bank garnishment or putting a lien on her car. She volunteered that someone else already has a lien on her car; apparently she was thinking ahead.
My questions are: (1) what can we do to enforce the parking? The county police said since we are private property they can't enforce. Is there some sort of foolproof paint we can use on her space? and (2) what remedies could we pursue to collect payment?
I cannot fathom the association having to foot the bill for work needing to be done to her unit all the while she's sitting around carefree with no intentions of even trying to pay a dollar towards the thousands that she owes us? We are hesitant to foreclose as we might not be able to resell her unit in this economy. Please help. Thanks.
Posted on Wed, Aug 11, 2010 @ 07:38 PM
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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Posted on Wed, Aug 11, 2010 @ 07:28 PM
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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Posted on Tue, Jan 12, 2010 @ 06:20 AM
When an owner of a unit in a condo association or HOA is delinquent in paying his condo maintenance fees and
then the property goes into foreclosure, then to a sheriff's sale can the HOA
force the new owner to pay the past HOA dues of the previous owner as a condition of
the sale? We are in the state of Indiana.
I have tried to get someone in the
industry to tell me exactly what a sheriff's sale involves (including the
sheriff's office that I called 4 days ago have not heard back from yet) and so
far I haven't been able to get any answers.
Last week the owner of the condo unit said
that the information regarding his unit going to sheriff's sale is a mistake but as of
today the delinquent property is still being shown on the list for the Feb. 2 sale.
There
must be some way to get information about what liens are required after the amount listed by the sheriff is met and the highest bidder takes
ownership. I have been told that the owner who is not the developer, bought the
condo unit through his business or LLC and intends to bankrupt the condo unit to buy it
back through another business he currently owns for pennies on the dollar. As a
matter of fact he may have already bankrupted that shell and thus sending the
property into foreclosure. That sounds illegal.
How much access to that type of
information am I able to obtain before the sheriff's sale. I just want to know
if there are going to be complications after the fact if I am the highest bidder
on the property. Can the sheriff's sale be cancelled at any time prior to the
sale and if so under what conditions would it be?