Almost 3 yrs unpaid dues...

We have an owner that has not paid hoa dues for almost 3 years now. After a couple years of fines & late fee letters, we filed a lien and small claims with attorney for $6k outstanding (includes legal fees too). The owner did not show & was awarded judgement.

Owner finally replied via letter with settlement offer of $3k (claiming it was all they had to their name) and that they would pay on time each month from then on. They also stated they have had financial hardship & job loss, upside down on mortgage and have not paid for same 3 years (working on loan modification), and working on education to get a job.

The letter continued saying if settlement is not accepted, they will drag on mortgage loan mod negotiations for another 1-2 years at the very least, at which time HOA will not see a penny. They will strategically file ch 13, followed by ch 7. They are judgement proof, and have no wages to garnish.

Should HOA take the settlement?

Well you did it to yourselves here... Fines most likely can't be part of this settlement. It's best to concentrate on the unpaid dues. The mortgage part of this has no bearing with the HOA once so ever. The HOA does not hold the mortgage. Your HOA has every right to foreclose on them if you all want. Which is what they are trying to avoid and know it. Still won't get any money if you do that. I don't believe the bankruptsy filing has any bearing on the lien owing.

If you accept the 3K, does that mean they still continue to owe current payments from this point on as well? Seems they need to not only catch up but also keep up with the current payments. Did you all consider that? If you don't do the math right...It could appear they are paying current dues with paying the back dues.

I may accept the 3K if it covers the legal fees (Which are always part of a lien) your HOA paid out. Then I would make sure they stay up to date with what they owe forward. That would be my compromise. However, put in place a lien policy ASAP. Sounds like they are going to be foreclosed on by the bank washing out any future lien you place on them. We had a 6 month lien policy unless you make payment arrangements.

So yes you may accept this offer if you put it up to the board/membership. However, realize what your accepting and the future terms you may be out of.

I would not count on getting paid on time every month from this point forward. You must also consider if you are willing to work with other members similarly situated now and in the future. Yet $3,000 is better than nothing.

thanks for the great ideas, very helpful! I will bring these options up with the rest of the board

Excellent idea!

Take their $3,000 with the condition that the lien for the balance will not be extinquished. That is, their payment is a partial satisfaction of the judgment and you will not actively pursue collecting the balance unless the home is sold.

BTW, when someone starts threatening with various legal strategies that they may take I am always skeptical. What they are saying may be true but until you have seen all their financial records you have no proof one way or the other. I have known a few people over the years who have milked the system by making claims of poverty and impending bankruptcy when their financial situation is quite healthy; they just learned how to intimidate their creditors.

DITTO

take the money ... keep the recorded lien

MM,

Typically a Board may not waive assessments. They can waive fees, monetary penalties and any other costs of collection.

If they owe 5K in Assessments, certainly take the three. I would also issue a 1099-C as required by the IRS for the forgiven assessments.

OR

Take the 3K, forgive any collection costs and establish a payment plan for the remainder due with the caveat that the lien will be removed once the payment plan has been completed.

Basically, it's similar to the CC&Rs saying you can't have clothes line. Unless the CC&Rs authorize the Board to allow clothes lines, they may not change the terms of the contract without permission to allow someone to have one. That permission is provided by amending the CC&Rs.

It comes down to the words used in the governing documents.

The CC&Rs typically specify that Assessments are for the expenses of the Association and the owner is obligated to pay them. The CC&Rs typically further specify that the Assessments shall or must be fixed a specific way (uniform, size of unit, etc.). Using the words shall or must means that the Board is required to do this.

The CC&Rs will typically also authorize the Board to charge interest, late fees, legal fees and other associated costs of collection. However that authorization typically uses the word may. Using the word may means the Board has the option of doing this.

Therefore, If the Board is required to fix and collected, the Board is required to do this unless the CC&Rs gives the Board the authorization to waive the actual assessment. Where there is an option (like late charges), the Board has the choice to exercise that option or not. Additionally, if the Board did chose to exercise that option initially, they may also choose to waive anything associated with that option.

As an example, this is the language used in our CC&Rs [emphasis added]:

Both annual and special assessments must be fixed, at a uniform rate for all lots and shall be collected on a monthly basis, unless the Board of Directors shall otherwise determine.

Any Assessments which are not paid when due shall be delinquent. Assessments are due on the first day of the month and must be paid not later than the last day of the month. When an account is in arrears, a charge of ten (10) percent of the unpaid balance per month will be assessed for each following month that the account is overdue. The Association may bring an action at law against the Owner personally obligated to pay the delinquent assessment or foreclose the lien against the property and interest, costs and reasonable attorney’s fees of any such action shall be added to the amount of such assessment.

We have interpreted this to mean that:

1) Association is required to fix assessments at an annual rate
2) Association is required to collect assessments on a monthly basis
3) An Account is required to be considered delinquent if payment not made by last day of month.
4) A delinquent account is required to be assessed a charge of 10%
5) By the CC&Rs lack of omission, the Association is not required to collect the 10% charge on delinquent accounts and therefore, may waive that charge (lawyer agrees with this).
6) The Association has the option of seeking legal actions to collect the assessment

I agree with Jeff. What they say might be true, but if it was they should have shown up in court and worked out a payment schedule or even better yet, shown up at the hearings I assume you had before going to court.

If what they say is true, that's easy to verify when you go to collect judgment. I don't know exactly how it works in your state, but part of collection is that they would have to turn over financial records. With that you could garnish their wages or savings account.

I was once involved in a situation where my then-husband's friend and the friend's wife were renting a room in our house. They had their own bathroom and were paying only a few hundred plus utilities. Both were working full-time and went out frequently. They both had new cars and had expensive extracurricular activities (learning scuba for him and attending Star Trek conventions for her). The husband gave a hardship story and it turned out that the husband hadn't been paying rent for months--nearly half a year. My now-ex-husband wouldn't push to get the rent, utilities or sweat-equity (they were given a discount since they were supposed to do yard work). I became the bad guy and insisted that they pay up. Soon after they moved out upon buying a house. There are some people who through their actions show that they cannot be trusted. That couple (at least the husband) are such people. I feel the same way about the people as per what has been presented here.

If these people were in trouble AND honest, they would have come forward and they wouldn't be threatening you with exit strategies. I wouldn't trust anything they said. I'd make arrangements to settle the debt (which is something that courts usually prefer), but I wouldn't forgive half.

Their chance to come clean was at the hearing and if they didn't trust your HOA board, then they had another chance before a judge.

Amy of GA says shutting off water is an effective way to collect. But even if it's legal in her state, it's not legal in CA to shut off utilities nor certain other services, e.g., elevators. So state laws seem to vary. In CA, though, cable TV may be terminated (if the HOA pays for it). I don't know about landscaping, but suspending that service potentially creates an unsightly view for others who do pay on time.

Our HOA has taken a tough stance on homeowners that refuse to pay assessments and continually rake up violation fines. We have actually started foreclosing on their homes. While it is an expensive option (around $2-3k depending on what it involved), we have been successful in collecting amounts due. There are some cases were homeowners try to low ball the HOA with settlements and promises of future payment, but we feel if they aren't going to bring the account current we are better off with new owners that will pay as required.

I am President of an association and we deal with this question all the time. It depends on whether or not you can afford it. The decision also depends on how much is owed. If an owner owed $16,000 and offered 3k that would be a big fat no. If they owe $6K then maybe take the deal. We would never accept less than half

We do not take threats from homeowners such as their stall tactics (they all threaten that). We simply file the foreclosure and boot them out of the unit.

In the end, they will at least not be a draw on resources once they are out. Besides since they are still having financial problems, if you accept 3k they would simply stop paying for the next 3 years and expect another serious reduction to settle. Then you could be screwed cause of the precedent you set.

You might also have state laws that deal with this.

In Florida, if a bank forecloses on a home in a condo association or HOA:
For either condo or HOA, the bank owes 12 months of assessments or 1 percent of the first mortgage debt, whichever is less, plus interest, late fees and legal fees secured by the association’s lien. For condos, the bank’s liability was increased from 6 months to 12 months pursuant to changes in Florida law effective July 1, 2010. This limitation only applies to qualifying first mortgagees, which can be determined with the assistance of the board’s legal counsel.

That means if the bank forecloses before our Association does, we can lose a chunk of change if the issue has been dragging on for 3 years.

The new owner is not responsible for the former owner debt. However, Florida is the only state this may be able to happen. It is basically a stop the bleeding issue once bank forecloses.

How in the hell does an individual owe $35k and still remains a Board member. That is unbelievable.

I am guessing there is no lien on the property. In 8 years, didn't anyone on the Board question the delinquency report. Didn't any members notice high delinquencies or account receivables when reviewing their annual financial report, which is required for every HOA in California.

My thoughts on how this will turn out. Well...from experience..kiss the $35k GOODBYE!

Sorry....he's a home owner and his issue just fell between the cracks. No one bothered to checkup on his account.

From experience?...what happened to you? You think the HOA will lose?

then:

past due bill @ 15 days

late payment fee @ and every 30 days

RECORD the lien @ 90 days

attorney for collection(s) @ 180 days

FORECLOSE @ 360 days

y'all will only need to do this ONCE before EVERYONE pays up

except the dead and the bankrupt

but

the foreclosure WILL stop the bleeding

Unfortunately, the HOA manager has taken this situation personally and has refused to negotiate. It looks like this will go to court.

The board has a decision to make. They can accept the offer and get the homeowner paying again, or go to court and possibly lose. The HOA board cannot excuse the past debt, but the courts can. I say possibly lose only because the mention of the notice not being given in the first place because of a failed address. But remember, just because you're accepting the lower amount doesn't necessarily excuse the the rest of the debt. That is where the lien comes into play.

Hmmm ... Why is everyone continuing to respond to a very old thread as already noted by GenoS???

Robert brought out a new issue on the 24th and didn't start a new thread.
Hence the replies.