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advice on heading off deadbeats, please. . . .

Started by CR2 • 25 replies • 2052 views

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CR2 (Minnesota)
Posts: 3
Posted:
I'm new to this forum, so I apologize if my question is "old hat."

The demographics of our 77-unit senior condo building are changing rapidly, and we're looking for effective ways to screen out probable deadbeats from among our new buyers. So far, mandatory credit checks seem like the most promising way to do it.

I'd be grateful to know of other tactics that have worked well for you. I'd also be interested in knowing of tactics that DON'T work, or are problematic for legal reasons.

Many thanks. . . .
JC3
Posts: 290
Posted:
Define "deadbeat".
How would you define and describe a condo PURCHASER as a deadbeat?
JM2 (Oregon)
Posts: 439
Posted:
Hello CR2:

I'm not sure what kind of association you have...it sounds like a condo; but a co-op would have more chance of approval/disapproval on new members than most condominiums or PUD's.

If there is no requirement for screening in your documents, then there would not be much that you could do. If there is a requirement that new owners go through some sort of screening process, then I would suggest that you look to your HOA's lawyer as a good source for what can/cannot be used to screen.

In most condos that I know of, people purchase without any approval process from the HOA; it's just a matter of whether they can purchase or not, from a cash/mortgage point of view.

Normally, a purchaser would be advised of the existence of the HOA and know of the assessments prior to closing on the condo; particularly with a condo, it would be unusual if they didn't know about the HOA and fees. However, it's up to them to read stuff and be on top of things.

With regard to people who do not pay their assessments, a good collection resolution would be in order, which would include a policy that the Board sets and management follows the procedure when there is a delinquency. Many law firms handle collections, will file liens, go after a personal judgment, etc. for you, and will be happy to set up a resolution for the board to pass (for a fee, of course). A good and reasonable collection policy is the best protection against "deadbeats," but I have not seen any that are foolproof, as long as there are people who file bankruptcy or go into foreclosure with negative equity in their homes.

J. Patrick Moore, CMCA
CR2 (Minnesota)
Posts: 3
Posted:
I'm grateful to JM2 for a thoughtful and informative reply.

As to JC3's challenge: I'm aware of the inflammatory resonances of the word "deadbeat," but it's the easiest way to describe people who persistently neglect to pay their association fees, and thus inflict the cost of their heat, hot water, etc., on the rest of us.
LindaC3 (Florida)
Posts: 526
Posted:
Here in Florida effective July 01,2007 it shall be illegal for any HOA or Condo Association to run a credit check on any person or persons wishing to purchase property ................LindaC
BradP (Kansas)
Posts: 2,640
Posted:
CR:

There are many, many reasons why people don't pay association fees. You will only be able to find red flags on less than 1/4 of these people. The other 3/4 could have lost a job, had a loved one die, had unexpected medical expenses, tried to help children or relatives with an expensive legal case, got divorced, car accidents, forgot and or are just plain sick and tired of the association and decided to not pay. Chances are if they are able to get a mortgage for the condo, their credit check is probably ok and they have a decent job. Things happen, people change, I understand what you are trying to do, but I think you might be better served spending your time and resources on a good collection system and education to head off potential bad seeds before they get too far into debt.
MartyD (Florida)
Posts: 43
Posted:
CR2,

Credit checks only display how diligent a perrson has been at taking care of their financial responsibilities. The fact that a person can secure a mortgage doesn't always infer that the individual is a outstanding citizen. The abilty to weed out your so-called "deadbeats" is not an easy one and in a condo environment probably the hardest.
If the problem that your experiencing is late payments or non-payment of assessments then I would notify their mortgage company or lender and let them deal with the issue. Their financial institution will make certain that you get you money to keep you from filing a lien for non-payment.
If it is any other problem that is CC&R related then you keep hitting them with the infraction letters w/fines attached and always send a copy of all correspondence to their lender...you will have less problems and if it truly is as you refer a "deadbeat"...they usually look for a place elsewhere that doesn't bother their style of living...
JoeW1 (New York)
Posts: 728
Posted:
CR2 - Please describe the type of condo regime you live in.

It is not appropriate to discriminate against and describe prospective buyers as "deadbeats" because of existing "deadbeats" in the HOA. If the buyer provides a good faith deposit (which is actually TECHNICALLY not legal in one state I know of), and has a mortgage guarantee, I see little that can be done, and it's inappropriate for the HOA (if non-co-op) to get involved. The HOA is treading on real-estate broker and attorney territory.

Since you are new to HOATalk, if you are going to use inflammatory words, you are going to be challenged. Actually JC3's response is a very thoughtful judgment because it may help you to gain perspective and amend your thinking.

As for paying association fees, neglecting to do so can be resolved by the HOA. Is the association bearing the cost of heat and hot water, etc. to the individual units? Or do you mean that there is heat, hot water, etc. that the association pays for common spaces and because the owner isn't paying dues it's unfair to the paying members?
PaulM (Pennsylvania)
Posts: 1,347
Posted:
CR2:
To better receive replys that will assist in your dilemma, please post what 'demographics' in your senior condo bldg. may be changing.

- Are you a dedicated Condo Community as established by the developer?
- Have residents recd. Condo Regulations from the developer?

CR2 (Minnesota)
Posts: 3
Posted:
Thanks to all.

PaulM: Our senior condo was built as such in 1985, when the founders were all solidly middle-class and in their 60s. Apparently many were friends; it was a “high-trust” community. Now they’re in their 80s, dying off rather rapidly. The “changing demographics” I referred to are simply that our building is increasingly a collection of strangers, most of them apparently solid citizens, some apparently not. Our current board, therefore, has some rapid catch-up work to do in preventing various abuses of the association that weren’t much of a problem before.

JoeW1: The association bears the cost of heat and hot water, etc. to the individual units. Your post suggests in this connection that "As for paying association fees, neglecting to do so can be resolved by the HOA." If you know of ways to get this done beyond the usual threat-lien-foreclosure route, I'd much appreciate your sharing them.
JC3
Posts: 290
Posted:
Re-read MartyD's post.
He says in part:
"...If the problem that your experiencing is late payments or non-payment of assessments then I would notify their mortgage company or lender and let them deal with the issue. Their financial institution will make certain that you get you money to keep you from filing a lien for non-payment.
If it is any other problem that is CC&R related then you keep hitting them with the infraction letters w/fines attached and always send a copy of all correspondence to their lender.."
MelissaP1 (Alabama)
Posts: 13,836
Posted:
People often complain about their HOA foreclosing or liening on a property. Some kind of "horror" story always comes up. However, if you look closer at the situation you will always find the reason of a lien or foreclosure is because the homeowner is NOT paying their dues. That is why HOA's have the right to place liens or foreclose. It's because they can't head off "deadbeats" but they can get rid of them in the end.
I would also like to post that a regular Joe Smo also has the right to place or take away property if they are not paid by contractual agreement. For example: You sell a car on "payments". The buyer pays you $1,000 up front and stops paying the other $4,000. You as an individual can go to the courthouse and sue, lien, or get a judgement to take back the property. These are the SAME options a HOA has. The HOA can sue, place a lien or foreclose on the property in order to get it's money owed. Why prevent a HOA (group of homeowners) from doing the same thing?
Now proponents out there want to STOP a HOA from having these "powers" to lien or foreclose for multitude of reasons. Mostly because they think that many situations don't garner such drastic steps. However, what legal instruments would be available to a HOA to collect monies? None. It especially doesn't make sense if Joe Smo can do it and a group can't.
Former HOA President
MartyD (Florida)
Posts: 43
Posted:
Exactly Melissa,
HOA's have got to start working smarter and NOT harder...let these lenders take care of your problem...they demand what is due them...just as much as the HOA NEEDS (not wants) what is due them.
When we send out newsletters and we discuss dues or assessments we try to instill the fact to homeowners/members that it requires everyone paying their fair share and not the burden of a few to carry the expenses...but even with that said, you still have the hold-outs and you can almost bet from one year to the next who they will be...
PaulN (New York)
Posts: 11
Posted:
While you cannot hold off deadbeats, you can certainly limit their services such as using the clubhouse, community swimming pool. Also, the BEST way is to post those that are in arrears on a bullitin board in a visible spot. This works every time!!!
BradP (Kansas)
Posts: 2,640
Posted:
Paul:

I think you should go back and re read some posts on here about posting of those individuals with deliquent dues. I am one of those that is vehemently against it because of potential legal ramifications and the fact that it creates nothing but bad feelings and contempt.
MartyD (Florida)
Posts: 43
Posted:
Yes, you are treading on "thin ice" when you start publishing names of individual who are delinquent. You are exposing the whole organization to some serious law suits. We don't even mention names at a board meeting...everyone is refered to as a Lot #(number) 14 hasn't paid..23 hasn't paid...Now if someone feels real energetic they can go home and look on the map and see who those folks are. Still the board is not held liable for publicly announcing their names.

The community next door to us published the 10 worst yards list. A friend of mine was number 8 on that list. The funny part was that he was in the process of putting in a spinkler system ( trenches running in all directions, hole for sprikler heads ) when the committee walked by and judged his lot. When he saw his name, he was furious and threatend suit if a retraction was not made...he got his way.

I don't recommend saying a members name at meetings or publishing a members name unless it is something good!
MelissaP1 (Alabama)
Posts: 13,836
Posted:
You can NOT hold off services for people who don't pay their dues in most cases. Especially if your HOA offers lawncare. Our HOA real responsibility is for lawncare ONLY. We can't NOT mow a member's yard. The yards are all attached together and postage stamp sized. Many condo's have small yards as well and can't just NOT mow a strip of yard of a non-paying resident.
You really have to be careful when denying services to a HOA member. It doesn't matter if they are a paying or non-paying member, they are STILL a member. They just are NOT a member in "good standing". This means they can NOT vote. Their vote is invalid until they pay the money owed. They should also be in danger of a lien or foreclosure against them as well. That should be enough motivation to pay.
I agree 100% that you can NOT post a member's name that is behind in dues. That's a PRIVATE issue between the HOA and that member. There are many reasons why a member isn't paying and not all of them is up for public scrutiny. How would you feel if you couldn't pay your dues because you were in the hospital for Prostate surgery? Do you want everyone to know about your Prostrate issues? Posting the fact that you owe the HOA money means your excuse for not paying could be known.
Former HOA President
BradP (Kansas)
Posts: 2,640
Posted:
I think you can withhold services, but you need to weigh the good with the bad. Our documents specifically say we can deny them services. However, not mowing their lawn or not picking up trash is probably not a good idea because it causes an eyesore. Not giving them water or heat may be against the law. However, why should they be allowed to use the clubhouse or pool?
PaulM (Pennsylvania)
Posts: 1,347
Posted:
BradP:
I agree that to withhold services of amenities would be in order for those who are in arrears, but not until they have been approached and they REFUSE to pay or work out a 'payment plan'. At least we have to give them an option to pay...and work with them, or else, by specific 'date' they 'will no longer be entitled to use of the clubhouse/pool, etc.'.

In this poster's case, it sounds like heat/hot water to individuals' units is paid by the assn. and if the violators are not paying their dues, can heat/water be shut off to them specifically? Would this be a legal action to take?

MelissaP1 (Alabama)
Posts: 13,836
Posted:
We used to shut off the water to homes that didn't pay their dues. At the time, we all shared a single water meter. The HOA paid for the water useage. So we could turn off the water to homes on non-payers. However, the former president made a deal with the city and we now all have separate water meters. No more turning water off.
I've heard a few stories from those days... they weren't pretty. You can imagine how angry someone can get with no water. So be careful!
Former HOA President
MartyD (Florida)
Posts: 43
Posted:
We can't withold service or enjoyment of common areas if assessments are not paid. We are allowed to keep you from voting on HOA issues. "Member in Good Standing clause".
PaulM (Pennsylvania)
Posts: 1,347
Posted:
Unfortunately, to 'keep you from voting on HOA issues' is most likely not going to be enough incentive for one who doesn't pay their responsibilities/assessments. So, we are left with...?
MartyD (Florida)
Posts: 43
Posted:
Quote:
Posted By PaulM on 03/27/2007 7:20 AM
Unfortunately, to 'keep you from voting on HOA issues' is most likely not going to be enough incentive for one who doesn't pay their responsibilities/assessments. So, we are left with...?

100% correct...HOA'S are limited to how difficult they can make it for non-conformist...(alias: deadbeats). You notify the Mortgagor/Lender of any and all violations of the CC&R's pertaining to assessments send copies of documents and all related items that you have sent this person (they should also be in violation of their aggreement with the Lender as well)...keep applying the pressure...the Lender will do whatever it takes to keep the HOA from filing a lien...works everytime.
PaulM (Pennsylvania)
Posts: 1,347
Posted:
...and for those who have no 'lender' involved--no mortgage?
BradD2 (Florida)
Posts: 418
Posted:
You can contact an Association attorney. We found one that is quite expense (at least to us) who deals with collections, governance document changes and covenant enforcement. There are attorney's for everything in this country you just have to find them; many even have websites.
BradP (Kansas)
Posts: 2,640
Posted:
Paul:

You can still go the route of placing a lien on the property.

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