Collection Agency vs. Liens For Unpaid Assessments

Hi All,
My Treasurer just sent me this e-mail. I know that before I became President my HOA filed a Lien on a homeowner's property for unpaid assessments, (after their third and final violation notice), but the assessments and fees were paid and the Lien released, all within a matter of a few months, not years.

Here is her e-mail: "I have a coworker that just took over as Treasurer for her HOA here in WW. There happens to be 2 homeowners who are delinquent on their annual assessments, one by 3 years and one by 2 years. She wanted to know if we have ever turned a homeowner over to collections. I shared with her that from my understanding, we file a lien on the property when a property owner is severely past due, and we will be paid when they sell the home. Although I didn't believe we have ever had this happen. I suggested she call the homeowner as they could be just unorganized and don't open their mail, or haven't paid attention to it, especially if it hasn't been pressed in the past.

I told Sharon I would check with you to see if you have ever heard of sending a homeowner to a collection bureau."

So, the question is: Do HOA's use collection agencies to pursue payment of unpaid assessments? Our Bylaws, of course, outline the Lien procedure for unpaid assessments, but they also say at the end of the Article, "The remedies provided herein or cumulative and the Board may pursue them, and any other remedies which may be available under the law, although not expressed herein, either concurrently or in any order." What this says to me is that we certainly could go the collection agency route rather than a lien. What say y'all?

Dorothy

Tim,
Hey there. I wonder about the "three or two years" time period of unpaid assessments. I don't know what this associations records are as to whether or not they contacted the delinquent owners or what. I did just find it interesting why, in my view, the more draconian choice of placing a lien on someone's property was preferred over just getting a collection agency to do the deed.

Dorothy

This should have been done by certified mail and sent to the homeower's address in the HOA. If they use the property as rental then another courtesy letter should be sent to that address if known. However, the letter does need delivered to the HOA's resident home address. Whether they open it or not is irrelevant as long as there is a record of them denying receipt.

We had a person who we sent the lien certified mail who wouldnn't open it. We used the unopened returned mail as evidence and pursued foreclosing on the home. Which we were successful in doing AND getting the owner's attention. All they had to do was pay the money they owed but they refused and lost the house.

I agree with Larry.
Collection agencies get very nasty and will ignore consumer protection laws to get their fee. You might be getting into more trouble than you'd like if you go this route.
Jeanne

Thanks everyone. I condensed and passed on all the information to my Treasurer to share with her friend, another Treasurer who apparently has inherited the whole mess. I am grateful beyond belief that in the twenty years we have been in existence, none of the Boards shirked the unpleasant responsibility of enforcing covenants immediately upon violation. As President going on seven years now, I've been accused and called all manners of names by those who feel covenant enforcement is kin to a "police state," "the Gestapo," "elitism," "witch-hunts," "harassment," and so forth. My response: you either enforce them or you don't, t'aint no middle ground. Thanks again.

Snn,

Welcome to the forum. Keep in mind that this thread is over 2 years old. It's best not to reactivate old threads as laws change and what may have been good advice in 2013 may be bad advice in 2015.


Typically, all costs of collection are charged to the member who is behind in paying their assessment.


The foreclosure process, technically, begins when the lien is filed. This is, as I understand it, because you are unable to foreclose without a lien on the property or a judgement from the courts.

Since step 1 of the foreclosure process, the recording of a lien, has begun.

Actually, one could argue that turning the process over to the attorney is starting the foreclosure process as well.


Different costs for different services.
Additionally, some law firms will collect fees differently. Some want full payment from the HOA. Some will take some payment from the HOA and wait to collect the rest from the owner or foreclosure process.

Although I am not the author of the post you refer to, JohnC is, I know from dealing with collections in my Association that there are several things that occur at the attorneys office. John is pointing out that they have negotiated with the attorney to limit the services provided until additional instruction is provided by the Association.

The first action (of writing the letter) likely required verifying ownership with the property records and drafting the letter (hence the small cost).

The second action (of filing the lien and notifying the owners of the lien) likely included an asset search of the owners, verifying military status, drafting the lien, filing costs, letters to the owner, the Association and associated postage, recalculating the Associations figures of what is owed, etc.

The third step, per John, is getting paperwork in line to be able to foreclose. This requires additional paperwork with the courts, more records search, notice requirements, etc.

The fourth step is the actual foreclosure.


Actually, depending on the step completed, it may be a simple letter, a filing of a lien, the approval from courts to foreclose or the actual final act of foreclosing.

Again, paying for each level/step of service as it goes forward.


Threats can always be made. Failure to follow through with the threat may lead to future doubts when the threat is made again.


Again, the filing of a lien is, technically, starting the process of foreclosing.


No you were correct. Once the attorney starts collection efforts on behalf of the Association, they are considered a debt collector for the purposes of the Fair Debt Collection Practices Act (FDCPA)


Laws vary by State. Some require a lien to be renewed every so often. Others allow the lien to remain until removed by the debt being paid or discharged by the courts (bankruptcy/probate/etc.).

As hard as this is to do, you do have to do it so that you set precedence to the fact that no one can just ignore the assessments. It sucks, but it does have to be done. We are doing this now and we do not expect to ever see the money again, but at the same time, I do not want someone to say later that I didn't do my due diligence.

We have seen a drastic increase in our late payers paying once they have been contacted by our law firm. They needed a kick in the butt/threat to do so. Of the worst 6, 3 got caught up within a few months. One made a one year payment arrangement. One is trying to make payment arrangements (their initial offer was absurd). One is under a bank foreclosure and ignores our attorney's letters. If you do not bring legal pressure, people will not pay attention to you.

Richard

I believe the national average for late dues (beyond one or two payment cycles) is about 3%. I always said an association should build in a 3-5% dues default rate.

I have found that letters from non-legal sources (especially the HOA itself) do not have the weight/threat that those from an attorney have thus I advocate to go this route sooner then later.

Our attorney letters do throw around "credit ratings" wording. I believe this in itself makes many sit up and take notice.

Thank you for reposes!

As I think this through more, I am wondering if this is best or most fruitful route to go... That is recording the claim of HOA lien..What's the benefit, if any, of in the alternative, filing suit in district court to collect about $3660 and then hopefully getting and then recording a money judgment against homeowner in Probate. As opposed to solely recording the homeowners associations claim of a lien in probate? I am thinking the HOA lien recorded only attaches to the specific property at issue whereas a judgment for money recorded would attach to any property or llc interest the homeowner has in the county. Wouldn't this also affect the homeowners ability to refi or sell or tranfer title on all or any of their other propert until the HOAs judgment against homeowner has been satisfied?

Ann,

Best to start a new topic as this thread is two years old.

Okay - I understand! Can i simply re post my question under a new thread/ discussion?