Delinquent Accounts

Started by BenJ • 16 replies • 3329 views

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BenJ (Florida)
Posts: 21

Posted:

We have a homeowner in our community trying to solicit members to take over the BOD in order to forgive past due assessments of delinquent accounts, of which we have many. I am in the process of reviewing Florida Statute 720-HOA for guidance as to the legality of this but has anyone been exposed to this type of action or have any advice/suggestion.

MatthewW4 (Arizona)
Posts: 500

Posted:

Ben,

I do not know the legality of this in Florida, but many HOA's have bylaws that forbid a delinquent owner from voting and from serving on the board. Your post was not clear whether this particular owner is delinquent and whether he was seeking a seat for himself.

Regardless of his status, public policy generally favors free communications in political matters so I doubt that he is violating any laws by soliciting either for himself or some other owner. He is most likely within his rights to seek votes even though you may find him annoying. (I feel the same way about certain candidates for public offices.)

The big question is whether the board has the power to forgive past due assessments. The consensus on this forum seems to be that assessments can never be waived or forgiven; that assessments are a debt that runs forever (or until the statute of limitations becomes effective).

A board could, however, decide not to pursue collection of delinquent assessments. This is not the same as saying the money is not owed; this is just saying the board will not try to collect it. The problem with this that most CC&R's give the individual homeowners the right to enforce the CC&R's through a civil action. The board would have no power to prevent such action.

As a practical matter, the subject owner must find sufficient support from those who have paid their assessments to elect him and/or his candidates so they can write off the unpaid assessments. My first thought is that those who paid are not likely to vote to give a free ride to those who have not.

Your best course of action may be to let him seek all the votes he can muster, which won't be many. The worst thing you can do is to attempt to muzzle him as this will turn him into martyr.

GlenL (Ohio)
Posts: 5,491

Posted:

Matthew Florida is unique in the debt also survives foreclosure and becomes the problem of the next owner. As John is fond of saying Caveat Emptor, I'll add especially in Florida.

Ben I've never seen a CC&R yet (not saying that there's not one out there, just that I've never seen it) that gives the Board the power to waive or forgive a Covenant. You need to let your fellow homeowners (you know the ones that pay) just what's going on and why. Can the deadbeats rally enough homeowners eligible to vote to recall the Board, possibly. Will the new Board have the power to waive fees, IMO no but they can possibly write them off as bad debt, which is stupid under Florida's law.

What brought this on? Are these deadbeats trying to get out of a debt or homeowners upset at collection costs even though they can be passed on to the debtor?

Studies show that 5 out of 4 people have problems with fractions

GnomeX (Washington)
Posts: 253

Posted:

Sounds like a deadbeat gone wild.

The Board has a fiduciary responsibility to the association. What would your association insurer say?

Might remind this deadbeat that should he succeed getting on the Board and pursue such dangerous actions, that there have been cases where individual Board members are held PERSONALLY liable.

READ THIS

"Such intentional acts typically are not covered under D&O
policies or indemnified. This means each Board member undertaking these actions may not
enjoy legal defense paid by insurance and may be found individually liable to the SVCA."

Granted this is Washington state but I would not be surprised if it doesn't apply in your state as well.

BenJ (Florida)
Posts: 21

Posted:

MatthewW4, GlenL, GnomeX,

Thanks for your reply. This individual has been a problem for quite some time. He didn't like the idea that a lien had been placed on his property and being informed that he was in violations of our covenants in the past. Annual assessment notices just went out and they included late fees and interest on all delinquent accounts and he didn't appreciate his bill. We have tried to put liens on all our delinquent accounts and informed them that their voting rights had been suspended. We have a big problem with delinquent accounts but being a small community we don't have the funds to hire a lawyer for collections. Also, it has been really difficult getting homeowners to volunteer for board positions.

GlenL (Ohio)
Posts: 5,491

Posted:

Ben what we did was hire an attorney that specializes in collections, he doesn't charge the COA anything upfront but adds his fees and legal costs to what the homeowner owes.

Studies show that 5 out of 4 people have problems with fractions

GnomeX (Washington)
Posts: 253

Posted:

Quote:

Posted By BenJ on 09/02/2013 11:37 AM
MatthewW4, GlenL, GnomeX,

Thanks for your reply. This individual has been a problem for quite some time. He didn't like the idea that a lien had been placed on his property and being informed that he was in violations of our covenants in the past. Annual assessment notices just went out and they included late fees and interest on all delinquent accounts and he didn't appreciate his bill. We have tried to put liens on all our delinquent accounts and informed them that their voting rights had been suspended. We have a big problem with delinquent accounts but being a small community we don't have the funds to hire a lawyer for collections. Also, it has been really difficult getting homeowners to volunteer for board positions.

Sounds like your typical deadbeat.

I am dealing with similar problems. Worse I have a Board that doesn't want to pursue too many foreclosures. Even on ones where the owner isn't even paying their property taxes and are up for county tax foreclosure. We have to foreclose first or the county tax foreclosure will wipe out our lien.

You may have to levy a special assessment to pay for an attorney. Politically unpopular but sometimes you have to do it. I have already called for one and it will likely keep me from getting re-elected. So be it.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Quote:

Posted By GlenL on 09/02/2013 12:18 PM
Ben what we did was hire an attorney that specializes in collections, he doesn't charge the COA anything upfront but adds his fees and legal costs to what the homeowner owes.

We have done similar. One difference is our attorney charges the HOA $95.00 for writing a letter telling the owner that they have 30 days to make payment arrangements with the HOA. The letter also says if arrangements are not made, the attorney will commence legal action. After that, the attorney charges the owner directly.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

We put in a policy of 6 months behind in dues we would lien. A year of non payment of dues depending on the circumstances we would DISCUSS foreclosure. Our dues are due monthly. Once we did that, people either started making payment arranges or we could sort out the "protesters".

A lawyer is not needed all the time to file a lien. Each state varies. I would call your local COUNTY courthouse and ask them the process. Some don't charge and others have a charge. Which the filing charges and lawyer fees are added into the lien that is owed. It's not just the amount owed, interest, and late fees. However, be very careful about liening for fines. That's a no-no in most states to lien for fines. Although there are some "creative ways" around that for some HOA's.

A legal service for a smaller fee than a lawyer may be able to file the lien on your HOA's behalf. A lawyer is like a tool for the HOA and not needed all the time. Use lawyers for collection of fees and legal matter responses. Otherwise, I don't see why the HOA can't just write letters themselves and save the dime...

Former HOA President

JohnC46 (South Carolina)
Posts: 14,265

Posted:

In SC an Officer of the BOD can get a Judgement in Magistrates Court (like small claims court). There is a $80.00??? filing fee. If a Judgement is awarded and not paid within the court ordered time (usually 30 days), the Judgement can then be taken to the Register of Deeds and a lien filed.

We decided to go the collection attorney route as people seemed to disregard our letters. So far only one has disregarded the collection attorney.

We also have one home behind but it is an estate (owner died) and it has a 100% mortgage on it. We are making no effort other then a lien to collect on this one. We have been advised to consider it a write-off.

BenJ (Florida)
Posts: 21

Posted:

Quote:

I'm hoping i can find such an attorney here, already talk to two but they want payment up front. I created our on lien form and had it reviewed by two different attorneys. It now cost us $10 to file a lien rather than paying an attorney $150.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Quote:

Posted By BenJ on 09/02/2013 3:36 PM

Ben

Ours is a section/department of a large real estate law firm versus a stand alone attorney. Also you might look for collection agencies that are lawyer operated versus harassment backed.

Try those routes.

RobertP17 (Florida)
Posts: 2

Posted:

Ben,

I am the Treasurer of a 192 home, self managed HOA in Florida, not a lawyer, but I have a few comments that I hope you find useful...
- Contrary to the statement made by GlenL, under Florida Statute, in general, only the dues for the 12 months preceding foreclosure survive the foreclos see http: //www.flsenate.gov/Laws/Statutes/2013/720.3085
- I agree with many other replies that the board does not have the prerogative of forgiving dues. Read the statute and read your association's documents. Unless specified otherwise the Statute trumps your declaration and your declaration trumps your bylaws.
- If your association is in dire straights and you are really having difficulty collecting money AND difficulty getting owners to serve you might want to consider getting your county to create a Common Facilites District for your development. The advantage is that collecting dues becomes a non-issue as dues are collected as an item along with property taxes. There is a price to pay but may be a good option for you. I think this is probably available in many counties but this is the link for Osceola... http://www.osceola.org/cfdcenter/home.cfm
- You may also find this webinar interesting if you have the patience to watch. It is from 2011 and I think much of this is now included in the 2013 Statutes. http://www.legal-webinars.com/webinars/20110613/OPEN_ME.HTM
- Another good link is this one that covers the some brand new Florida legislation... http://pmsiofflorida.wordpress.com/2013/07/06/new-hoa-laws-taking-effect-july-1st-in-florid there is a link on the web page "legislative guide" that is worth a look-see. I would attach the download but the file is too large. The guide is issued by the same law firm that provided the webinar I referenced. I am not schilling for this firm but I came across both items today when I was trying to research some issues relating to our HOA.
- Florida law provides a lot of protection for both owners and HOA's and there is no reason for a few owners to successfully hijack an HOA. However, if it does get down and dirty get some legal advice.

RobertP17 (Florida)
Posts: 2

Posted:

Ben

I had missed you later post "I'm hoping i can find such an attorney here, already talk to two but they want payment up front. I created our on lien form and had it reviewed by two different attorneys. It now cost us $10 to file a lien rather than paying an attorney $150."

Your HOA can file a lien for minimal cost but make sure you follow all the requirements by sending a suitable 45 day letter by registered mail to the owner, to the property and... I forget all the details but it is all defined in the Statute. We found it more productive and so much easier to turn delinquent accounts over to our lawyer after sending an email advising owner of our intentions. I also drafted a policy and procedure policy that the board adopted and that we follow, well mostly, consistently.
It does make it easier when collecting late fees and interest charges if we can point to the policy rather than accepting a bunch of lame excuses as to why late fees & interest should be waived.

JH3 (Maryland)
Posts: 67

Posted:

There is little which is black & white with HOAs. There is always another way.

While the board cannot waive association fees, they can accept settlement offers.

When the association takes a delinquent homeowner to court, instead of filing a judgement against the homeowner, the association can offer a settlement agreement (or respond to one) which reduces the amount owed. Most times, this reduction is a reduction of attorney fees & late fees, however, if it gets low enough, you're cutting into the owed assessments.

Something to keep in mind.

BenJ (Florida)
Posts: 21

Posted:

JH3,

We now provide account statements to homeowners listing assessments due/delinquent and any penalties/fines and interest. This has helped out in several occasions where we eliminated the interest charges(18%) and settled for delinquent assessments plus actual collection costs.

BenJ (Florida)
Posts: 21

Posted:

Robert,

Yes, we send out the 45 day notice both certified mail/return receipt and regular mail. We included the 45 day notice procedure in our rules and regulations. I'm hoping we can find a lawyer that will do collections on a contingency basis and we can at least recover a past due assessments at a minimum.

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