Collection Policy issues

Started by MarkM19 • 8 replies • 2108 views

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MarkM19 (Texas)
Posts: 1,459

Posted:

We are a 400+ Single Family HOA in California. I am a current Board member. We have a General Store in our community that has a cuurent tenant that has not paid any of the lease payments (It is only $1.00 per month with a $50.00 late payment) for the last 4 years. They also have in the contract that they are required to pay all utilities which average around $1000.00 monthly. This bill is currently paid by the HOA. When I do the math I think they owe the HOA over 60K yet the tenant has never been asked to pay until very recently. This tenant is also a homeowner. They have a small group of very vocal followers who feel they are the only tenant who could make the small store work in our current economy. We have had trouble with them and are having a hard time getting them out because of the small town politics in our community.

Our HOA has been very aggressive pursuing other delinquent owners who do not pay their monthly dues yet we are ignoring this tenant that owes this much money. Besides the obvious statement that we have not done our fiduciary duties on the debt. Are we setting ourselves up for some lawsuit if we write off this debt without sending them to collections like every other homeowner not in good standing.

Thanks in advance for your feedback

MelissaP1 (Alabama)
Posts: 13,836

Posted:

A bit unusual situation. My concern isn't a perceived lawsuit. It is the fact this is a tenant situation. A HOA can NOT force a tenant to pay their rent or even the dues (Except in Florida for dues). It is the OWNERS responsibility.

Who is the owner of this store? Need more information in regards to the actual owner and then do they pay dues to the HOA? That info can help with advise.

Former HOA President

KellyM3 (North Carolina)
Posts: 2,239

Posted:

Mark,

The HOA owns the building housing the General Store, right? So, you can't force the HOA to pay itself.

With a lease rate of $1/month, it's clear that the HOA saw the service of a small general store as an amenity. It's a basic amount to put something on paper since real estate transactions need some value attached as a consideration. The HOA not placing utilities on the lease holder's name also lends me to believe this is considered an amenity, at least by a previous board regime.

I'd get informed on the matter but it seems this general store could not operate openly yet under a cover of darkness in regard to HOA finances. Personally, it sounds neat to have nearby and creative.

MarkM19 (Texas)
Posts: 1,459

Posted:

Melissa,
The building is owned by the HOA and the rent is supposed to be paid ot the HOA. The current tenant has been leasing for the last 5 years and is also a HO. The board has never looked at or revised the original contract. It is a small store that is only opened for 20+ hours a week (tenant says that this is the only hours they feel they get enough traffic to be open) others have asked for longer hours. We live in a area where many HOs commute hours to get to work daily. They are currently not open on Sundays when most HOs would be able to utilize the store.

Beside the rent issue the main issue I have with this store is when they are open all they do is gossip and spread miss imformation about the board and politics. When our last election was going on they had kids waving signs in front of the Store saying "Occupy XXX" HOA name and "Keep the piece renew the lease" they turned the store into headquarters for the 3 candidates that supported the store. 2 of them were elected to the board and this has divided our community.

Kelly,
I hope this helps answer some of your questions.

Thank you very much for giving me advice. It can be lonely being on a board when these types of issues arrise.

Mark

TimB4 (Tennessee)
Posts: 21,062

Posted:

Mark,

I'd suggest the following:

1) put the store on it's own utility meters. Yes it will cost the Association a little bit of money to do this but this will prevent future tenants from taking advantage of the HOA paying utility bills. Once the change over occurs, if the tenant doesn't pay for their utilities, the utility company will turn them off. The HOA won't be involved.

2) Make a deal to waive late fees if they pay everything in full. If they refuse, call for a vote to escalate collections.
If members complain, ask them if they are willing to pay those bills for the individual. Once it's explained that the money will have to come out of their pockets, most members tend to change their opinion.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Your HOA will have to hire an attorney on this one. Which will be tricky. Remember your HOA is a GROUP of individual homeowner which the board represents. You ALL own that store and pay it's bills. It may be time to define the situation for the membership to understand what is going on. It is their right to know how the HOA is doing it's business and the lack of collections that is going on. This is OPEN information for all to acknowledge and be aware of.

However, I would not discuss the personal side of this issue of the gossip and speaking outside of the meeting. That is human nature and happens anywhere you go. We have a store like that where I work. Heck, that happens when I go to the beauty shop...Believe me I hear about how bad someone's management is almost everywhere I go when employees talk...

Keep this in the BUSINESS realm and to the facts. Your HOA owns this store, this is the contract, this is how much utilities is paid, and this is how much was collected. How would the rest of the owners like to proceed? Remember this is NOT just your opinion but the rest of the group's as well. Hence why your opinion may be against the grain of the others. Majority rules.

So stick to the facts and represent those. You may find some details you overlooked in the arrangement and may have a different view too.

Former HOA President

MarkM19 (Texas)
Posts: 1,459

Posted:

Melissa,
You have given me some great advice. I really appreciate this site. It is so helpful to hear from others that have the insite into how HOAs work. Sometimes being right in the middle of a situation does not allow you to see the forest through the trees.

Mark

KellyM3 (North Carolina)
Posts: 2,239

Posted:

Quote:

Posted By MarkM19 on 05/26/2012 7:38 PM
Melissa,
...the main issue I have with this store is when they are open all they do is gossip and spread miss information about the board and politics.

Why this DOES sound like a neighborhood general store. I wouldn't target the general store because people gather at it to spin tales and tell lies. Your minutes and open meeting actions speak more loudly than any gossip. Happy HOA dues payers/customers are silent. If random, non-political, "open the pool on time" residents are not complaining, the general store is likely accepted no matter the financials of subsidizing the rent and utilities.

However, it's worth a look for information as a responsible board member would want this knowledge.

Good Luck!

JM10 (California)
Posts: 503

Posted:

Quote:

Posted By MarkM19 on 05/26/2012 7:38 PM
Melissa,
The building is owned by the HOA and the rent is supposed to be paid ot the HOA. The current tenant has been leasing for the last 5 years and is also a HO. The board has never looked at or revised the original contract. It is a small store that is only opened for 20+ hours a week (tenant says that this is the only hours they feel they get enough traffic to be open) others have asked for longer hours. We live in a area where many HOs commute hours to get to work daily. They are currently not open on Sundays when most HOs would be able to utilize the store.

Beside the rent issue the main issue I have with this store is when they are open all they do is gossip and spread miss imformation about the board and politics. When our last election was going on they had kids waving signs in front of the Store saying "Occupy XXX" HOA name and "Keep the piece renew the lease" they turned the store into headquarters for the 3 candidates that supported the store. 2 of them were elected to the board and this has divided our community.

Kelly,
I hope this helps answer some of your questions.

Thank you very much for giving me advice. It can be lonely being on a board when these types of issues arrise.

Mark

It's pretty easy to keep a business running if you don't pay for rent or utilities. That's basically no overhead.

What is the lease for? Month to month? Year?

The tenant isn't keeping up with the contract. I'm sure you could find other businesses who would love to open up a store under the same conditions. HOA members would be upset if they realized that they were subsidizing the store and how much was owed just in utilities.

I'm with the person who said separate utilities.

A contract is a contract. It doesn't matter if it is a homeowner and it might be easier if it wasn't a homeowner.

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