Collection Agency vs Lien vs Small Claims Court ...what to do?

I posted about my HOAs particular circumstances a few months back but cannot find the topic.

In a nutshell: I am the president of an HOA for a community of 8 units/condos. Only 3 units are up to date on their fees. Three units are behind and getting caught up. Two units are not paying at all. Collectively these two units owe the HOA $3200. We have left notices in their doors for months and still no effort on their part to pay. We have already placed a lien on one unit and will place a lien on the other but...neither of these residents have any intention of selling any time soon.

I read through some older topics about collection agencies and found that olddebts.com may suit our needs. Have any of you used this service to collect bad debts?

Any other ideas? Can an HOA file for bankruptcy? we may have too if these people don't pay.

Thanks all for your suggestions and thoughts.

Bridgett

Larry, these are owner-occupied units.

I am hesitant to foreclose on one of the residents. She is, in all likelihood, dying of cancer. To me it is just bad kharma to put her out on the streets in that condition. However, that doesn't negate the fact that she owes us money. It is really a bad situation for us.

I am so mad I could scream but I am at work so I won't.

So really, there is nothing to be done about these folks but put a lien on their condos. This means that we will have to raise our fees on the other 6 tenants to make up the difference. Part of the problem is...we have master-meters. Meaning 4 units are connected to one gas and one electric meter. Our utility bills are paid out of the HOA fees. We are in danger of having our utilities turned off, for ALL residents not just those who are behind.

LOL, thanks for the reality check. Yes, there is no way we could afford to separate the units as much as we would like too. This is just so frustrating. This has been an ongoing problem with these two residents for years now.

I am discussing this with the treasurer now but we will be having an emergency meeting with the unit owners within the next couple of weeks. I don't think we can avoid raising the fees on the members that are paying.

Thanks all for letting me vent and for your advice.

Bridget....is the B for Bardot.....LOL

We have tried several ways to collect back dues in that we talk to people, try and arrange payment plans, waive late fees ,etc. but it gets to a point where they ignore us or do not honor their promises. We felt that by this time we had no "weight" with them so we needed an alternative.

We have had discussion with a real estate law firm that has a division within it that specializes in owner associations. They use a multi step process to collect. To the best of my recollection it will go like this:

1. After 30 and 60 days late we send polite letters from the HOA. In the next quarterly bill, the HOA sends notice reminding the owner they are 90 days late and asks for back and present dues or a payment schedule acceptable to the HOA within 30 days or we will turn the account over to a law firm for collection. It is now almost 150 days since we have seen a payment.

2. The law firm sends a letter informing the homeowner that they have received the case and are prepared to file a lien and commence to foreclose unless owed dues are paid or a payment schedule is arranged with the HOA within 30 days. The firm charges the HOA $65.00 for this letter.

The law/collection firm then back off and awaits further notification from the BOD. It is now back in the BOD's lap. The BOD then tries once again to reach an agreement. In several case, not all this was enough for them to make arrangements to pay. If no arrangement are made thent we turn it over to the law/collection firm again.

3. Law/collection firm sends a letter saying a lien has been filed (which it has)and foreclosure has commenced. It will now cost the homeowner $495.00 (to the law firm) plus owed dues to the HOA to stop the process. No charge to the HOA.

4. Law/collection firm files some paperwork with the court about foreclosure and notifies the homeowner that foreclosure has begun and it will cost $995.00 (to the law firm) plus back dues to the HOA to stop the process.

5. The next step would be the HOA pays the law firm $400.00 and foreclosure commences. The process is completely stoppable at this point by the HOA, the HOA would still have a lien, and the law/collection firm is owed $995.00

We do not want to be in the real estate business as in we have no wish nor desire to foreclose. I am not saying all should not foreclose but our decision is not to.

We have not gone past Step 3 with an one yet.

We have had three foreclosures. Two took about one year to settle and both units were sold but the HOA saw no money from our liens as there was none there to be had. Our present one is a result of the owners death. He had a 100% VA loan and the home is tied up in his estate.

To repeat: we use a law firm, not a collection agency.

Hope this helps.

Bridget,

I run an HOA collections firm in Northern California. Since New Mexico is a judicial foreclosure only state I concur with your assessment of seeking out an attorny and foreclosing on the individuals who are not paying. As a memeber of the Board, you have a fidiciary duty to protect the assets of the Association.

My only other advice is to try and get the delinquent homeowners into a payment plan. Offer to waive interest and late fees in exchange for a payment in full or a payment plan. If that tactic does not work, hire an attorney and foreclose on the units to get new paying members into your Association.

If you have any other questions feel free to PM me.

We would gladly work with anyone behind that came to us and wanted to work on the issue. We sent letter after letter saying so. Health or not, ignoring us is not acceptable.

Oh, God! Just when this aging Baby Boomer thought he knew all the pitfalls of growing old, add one more to the list. Thanks, Steve.

The very same group of people who caused classroom and teacher shortages in the 1950's and 60's and housing shortages from the 1970's until the bubble burst in 2008 will soon create a crisis in medical care as they begin to pack the nursing homes and hospitals. As Steve has pointed out, all those dying Boomers will also clog the courts with HOA foreclosures because their paltry social security checks will be eaten alive by the medical industry.

To those who will have to deal with our mess, remember that we Boomers were raised on bread that builds strong bodies 8 ways, Flintstone vitamins, and wonder drugs. As a group we are far healthier at age 65 than our parents and grandparents were and we are likely to have a larger percentage of us living into our 80's and 90's. This means that our children and grandchildren will be dealing with us well into the middle of this century. On the bright side: they are going to get some smoking real estate deals!

An update:

on Dec 23 I mailed to letter via registered mail to the delinquent parties. I gave them a deadline of January 4 to provided a payment plan. We have had not response from the delinquent parties. Off the lawyer we go.