—Compassionate About Collections
“While it is very unfortunate that the owner in your community is facing unemployment and its accompanying financial difficulties, the fact is that the Board of Directors has a fiduciary duty to the membership to pursue the collection of delinquent assessments,” says attorney Leigh C. Katzman, a partner with the community association law firm of Katzman Garfinkel in Margate. “In other words, it is not the board’s choice, but its obligation to pursue collection of delinquent accounts. After all, each non-paying account places an additional financial burden on the association and its members who are current in paying assessments. That being said, the proper course of action for this matter, as well as for all other delinquent accounts is to turn them over to the association’s legal counsel for timely commencement of collection efforts.
“Collection efforts require strict compliance with statutory guidelines and time frames. The requirements imposed by statute are in addition to any requirements contained in the association’s governing documents or properly adopted collection policy. The most important of these statutory guidelines deals with notice requirements. The collection process begins with notifying the delinquent owner of the association’s intent to place a lien on the property if the account is not brought current within thirty (30) days for condominiums (forty-five (45) days for homeowners’ associations.) This notice must be sent via certified mail, return receipt requested to the last known address of the owner as reflected in the association’s records.
“If the owner does not pay the amounts due in full pursuant to the Notice of Intent to Lien, a claim of lien is recorded against the property in the county’s public records, and the owner is notified in writing of the association’s intent to foreclose the lien. Once the delinquent owner is given notice of the association’s intent to foreclose the claim of lien, the association may proceed with a foreclosure action. In a condominium association, a thirty (30) day Notice of Intent to Foreclose the Lien must be provided (forty-five (45) days notice is required for a homeowners’ association.)
“An association may foreclose its claim of lien by filing a foreclosure action with the court, which is handled in the same manner as a mortgage foreclosure. In addition, the association may bring an action seeking a money judgment against the owner of the property without waiving its claim of lien. Provided that proper notice of intent to foreclose its lien is given, if successful, the association is entitled to an award of attorney’s fees incurred in connection with its action to foreclose a lien or to recover a money judgment for unpaid assessments.
“Of course, at any time during the collection process, the association may permit the owner to enter into a payment plan which provides for at least full maintenance going forward and a reasonable amount toward the arrearages each month. Generally, it is recommended that payment plans should only be permitted to span a reasonable amount of time, and should provide that if all installments are not paid timely, the owner waives all defenses and the association can proceed with its foreclosure action.
“The reality is that in today’s economy, most communities cannot afford to allow delinquent accounts to spiral out of control, and must take an aggressive approach with delinquent owners. While the association may believe that it is being sensitive in sending multiple delinquent notices and not immediately initiating collection efforts, it may be doing more harm than good. Delaying the collection process and allowing delinquent amounts to balloon only makes it that much harder for the owners to pay and for the association to ever collect. After all, it is generally easier to resolve a small debt than a large debt. Therefore, it is generally recommended that the association adopt a clear collection policy that treats all owners in a similar manner, provides for no more than one warning from the association before turning the file over to legal, and places all owners on notice that all accounts delinquent in excess of a certain time frame will be referred to legal counsel so that collection efforts can commence.”