Collections of fines/legal fees

1. It is absolutely legal.

2. Pursuing those presently in arrears is likely to deter any more from not paying dues. This might be a win overall.

3. The HOA might end up collecting overdue fees AND legal fees. (Then again, maybe not). This money would go back to the association. Fees could go down at a later time.

4. If any MORE homeowners don't pay, your dues will go up anyway to make up the missing money.

It might or might not be a good idea to pursue legal action. This depends on the particular circumstances in your association, and this has presumably been considered carefully by the board of directors.

Well, going after delinquent homeowners isn't cheap and attorneys don't do anything without some money up front (it's not like those personal injury commercials you see on TV). The association should be asking for reimbursement of all legal expenses as part of their lawsuit against the homeowners.

If you think about it, you're already paying more because of delinquent homeowners - the Association's bills still have to be paid and contractors don't know or care if you have one or two or half a dozen (or more) who aren't paying. That's a big reason why assessments go up (in addition to increased maintenance costs).

Hello, thanks for the input..our board did hire an attorney(s) and they are including all attorneys fees and court costs in the collection (we have to pay them up front). I should have included that our HOA is small, we have only about 100 homes yet 23 are delinquent. We do not have enough cash collected (including the increase) to pursue each homeowner fully. Apparently the fees for attaching a lien do not include also trying to garnish wages or bank accounts, which is what they are trying to do. Bottom line is I almost feel like it's not worth spending thousands to collect hundreds.

When I stated 50% that breaks down to : $200 annual dues for 2011 now $300 annual dues for 2012.

We are concerned that this will keep increasing as the board insists on chasing delinquent owners. If we had an attorney that collected upon settlement we'd be better off as far as I am concerned.

Thanks,

Thank you for the information...

Jim

Jim, it's a 1/4 not a 1/3 who are delinquent a 1/3 would be worse. All of the fees outlaid to collect the debt should be recoverable from the deadbeats including the lawyers fees. Remember the Board that increased the fees, don't get a pass, they have to pay them too. So without knowing all of the details I imagine they wouldn't have done it if they saw any other way. And while legal fees were the reason given, I would think that part of the increase went to making up the $4600.00 the deadbeats didn't pay this year and who knows how much for past years. The other bills that the Association is responsible for, including reserves, still needs to be met.

Jim:

My POA did the same thing but far worse. We had about four percent of our owners who were delinquent, owing an estimated $25,000 over serveral years. Our board hired an attorney and for two years in a row spent half of our annual income pursuing those owners in court. As near as I can tell we collected zero, except for one property that went all the way through foreclosure. See my recent thread about "deep doo doo" to find out why that was not good for us.

Two pieces of good news: the BOD finally terminated the lawyer although they still insist that they have a mandate to pursue the delinquent owners. Also, since all of our board members were born without spines they have not raised the assessments, they just stopped doing the work the money was supposed to pay for.

In the latest newsletter our president admitted that the combination of delinquencies and lawyer bills has cost us about $200,000. He left out the part that the delinquencies were $25,000 and the BOD blew $175,000 in a failed effort to collect.

This is exactly what i am trying to avoid! There is no guarantee any money will be collected but it is guaranteed that we will have to pay the Lawyer for his time!! You are the only one so far that has even remotely seen my point of view.

Thanks!
Jim

You are correct it is 1/4 my mistake, but my point is that I can see the board continually increasing dues to offset future legal liabilities while not collecting a dime! It is feasable to see our HOA go into tremendous debt to try and collect back dues, in the end it will be a very costly mistake that we could have avoided if we just would have considered all options...not just hiring a lawyer at $xxx per hr to file papers and provide updates. I do not want those to go unpunished who have not paid, but lets be realistic...spending thousands to collect hundreds? I know the reserves need to be met but even our Management company indicated we should have moved passed even having an HOA if it weren't for the high delinquency rate (no pool, no clubhouse, no common grounds or gate to pay for).

I appreciate all the helpful advice,

Thank you!
Jim

Your also over looking reality in this matter and being a bit short sighted. No offense intended. You are forgetting to factor in a few variables on the collecting. When the time comes for these people to sell or are even foreclosed on by the bank, the money they owe isn't overlooked. It accumulates to the time they decide to pay it off. (A lawsuit wouldn't necessarily continue to accummulate or collect legal fees unless ruled by the court to do so).

This means that the legal funds the HOA is spending now is added onto what they owe. Eventually this turns out to be an investment that returns back the money spent and back dues. No matter what court instrument the HOA (lien, lawsuit, foreclosure) the court can ONLY make them "Whole". There won't be a profit. It stops the bleeding of the HOA and sends a message.

Your HOA may be overspending some money due to their lack of education in this matter but still need to take actions to collect.

Your HOA should utilize the Management Company and/or Google to find attorneys that do not charge the HOA fees upfront. We are here in MD and have had issues where we spent thousands of dollars on attorney fees, yes, we got it back in the end, which was quite a $8,000 bonus five years later...

But we finally found an attorney that charges all fees directly to the delinquent account. We don't get our money until the attorney fees are paid (which is the same with upfront fees), but at least we don't end up paying thousands in advance.

It also gave us more security in knowing that the attorney hasn't been paid either, so they have more of a vested interest in getting that money back, for them, and us!

Jim,

Maybe I did not make it clear in my earlier post but I agree with you fully. I described how my POA spent $7 suing to collect each dollar that was in arrears and lost the whole wad. DO NOT GO DOWN THIS PATH.

The only persons I would even consider suing would be the owner who claims he should not have to pay and then only if I knew where to find him and suspected that he has the funds to pay off a judgment. All others are a waste of time and money.

The sad fact is that HOA's have little real power to collect as in most states a first mortgage is superior to the HOA's lien.

Collections is far more difficult than most people realize. The IRS can take your home, your car, all your other property, put you and your spouse in jail, and really ruin your day. Even with all this power, there are billions of dollars in unpaid taxes owed to the IRS. Now, how likely is your HOA to collect all that is owed?

In your original post, you asked if the HOA could legally increase assessments to cover its losses in filing useless lawsuits. The answer is yes although the amount of an increase may be limited by law or by the community documents. The BOD has the power to try to collect delinquent accounts. While what they did was not the smartest thing, it apparently was done in a good-faith belief that they were advancing the cause of your association. Your remedy is to run for the board of directors.

A lien is not a form of judgment. A lien is a unilateral claim from one party that another owes it money. A lien can be challenged and dismissed in court. Liens are also subject to legal limitations. In most states, an HOA lien is inferior to a first mortgage lien so that if the lender forecloses the HOA collects nothing. Some states do allow the HOA to collect some unpaid fees from the lender.

I know of no way to foreclose, i.e. to acquire title to property, without first filing a lawsuit, obtaining a judgment, and placing the property up for public sale under the supervision of the court. Foreclosure on an HOA lien is a judicial proceeding.


I agree that lawsuits are not the best way to pursue a debt owed to an HOA. Judgments do, however, accumulate interest, usually both prejudgment and postjudgment. Whether the HOA can recover its attorney fees depends on whether the CC&R’s provide for it, whether the HOA requests it, and whether the fees are reasonable. Costs associated with filing and serving process are almost always recoverable from the losing party.


The “suit bringer” is called the Plaintiff. Filing a counterclaim is usually less expensive than filing the initial lawsuit and eliminates the need to pay for a process server. Otherwise, there is little advantage to waiting for someone to sue the association.


The need for an attorney in court varies from state to state. In Arizona, an officer of the association may represent the HOA in Justice Court where it may sue for up to $10,000.00. Higher amounts or foreclosures must be pursued in the Superior Court and the association must be represented by an attorney in that forum.

Usually any lawful debt may be the subject of a lawsuit, but that likely varies from one state to another. In AZ, we can sue to collect unpaid fines but cannot foreclose if the regular assessments have been paid.

Both liens and lawsuits are unpredictable in their outcomes. Liens are usually less expensive to file than lawsuits. My advice to any HOA would be to file the liens and cross your fingers that the property is sold so that the liens get paid off.

I strongly recommend against filing lawsuits to collect unless you can do so without paying for an attorney, you know where the debtor is, and you know that he has sufficient liquid assets to pay a judgment. Otherwise, the association will be gambling its cold hard cash that it can obtain money that it does not have and likely never will have. Your HOA has a better chance of coming out ahead if it buys lottery tickets.

Jane,

Welcome to the forum.

This thread is over 4 years old. Reactivating old threads, even if the topic is the same or similar, can become confusing. This is because laws change and what what good advice in 2012 may be bad advice in 2016. Therefore, it's best to start a new topic (done by clicking on the words add new topic directly above and to the left of the blue bar identifying the various topics.

JamesH11

Regardless, how the delinquency issue is pursued, if using a lawyer, the lawyer will be paid!!! Hence, why they are lawyers.

HOAs might consider having more member meetings and inform the members of the ongoing situation.

Often, when owner/members realize the severe impact of delinquency, they will reconsider placing their own property in jeopardy and make arrangements for payment of assessments such as: automatic payments, pay the fiscal year assessment upfront, or other financially sound methods of insuring the obligation for making a payment is satisfied to alleviate a potential catastrophe.

BoDs can adopt rules and procedures for assessment payments as long such rules are published (adequate and proper notice), and all members are allowed to comment before the publishing of the rules.

See my post of 05/02 and this is a major law firm in SC that we use.