Virginia Associations, will HB-791, scheduled to be law in July, hinder your ability to collect late assessments?

CHAPTER 784, (which was HB791) specifies that the Association may impose monetary penalties for infractions of the Declaration (CC&Rs) providing that the CC&Rs allow monetary penalties. However, before such penalties can be assessed, a hearing must be held.

Most Associations do have language in the CC&Rs that address paying assessments and typically those same CC&Rs specify penalties for not paying on time. Therefore, obviously, failure to pay assessments on time would be a violation of the CC&Rs. However, one could argue, based on the language of this legislation, that failure to pay assessments on time would now require that the Association hold a hearing before any late charges could be imposed.

Additionally, per that same legislation, the amount of monetary penalties is limited to actual damages.

Therefore, if this becomes the interpretation of this legislation, Associations such as mine could be holding up to 10 hearings a month (for those who simply failed to drop the payment in the mail on time). Additionally, since we are self managed, our damages would be the cost of printing a letter and mailing it (vs. the 10% of assessments allowed by the CC&Rs).

This, if the language is interpreted this way, could become a major hindrance for all Associations trying to collect late assessments. Additionally, it would require the rewrite of all Associations collections policy and, possibly there enforcement policy (for example, the way ours is currently written, someone could postpone a hearing date for months).

I know that this is likely not what the legislatures intended, but, please take a look and tell me if it very well could be one of those unintended consequences?

I haven't brought it to the attention of our Board yet.

Tim

Oh, here is the link to VA Property Owners' Association Act

The section of the Bill I'm talking about (from the link in the earlier posting) is about halfway down:
§ 55-513. Adoption and enforcement of rules. The link above shows what the act currently looks like.

I'm not clear if the language of the bill could affect condominiums effort to collect assessments or not.

Just kidding, but we do have to hold a lot of hearing due to the due process provision.

The way I read the language is when fines are imposed, which is what we have here. I don't read that for assessments. Infraction of CCRs would mean infractions of an association's published rules and regulations. Assessments, anywhere I have read them are completely separate.

I have always felt that Boards or MC can and have abused the fine process, and that many if most associations do this without any due process. IMO, this is a step in the right direction.

I do not agree that a late charge applies to this section. I would look at the websites of HOA attorneys within Virginia for their interpretation .

I thought of encouraging the Board to seek a legal opinion. However, when it was suggested that the Board seeks an opinion on something else, the majority of the Board was of the opinion that we could pay for a legal opinion now, but that legal opinion could change in the future so we may as well do the best we can with the understanding we have, save the money, and ask for an opinion if the boards actions are actually challenged.

Therefore, I don't think that they will agree to spend the money.

Hearing your opinion that it doesn't apply (which I also believe was the intent of the legislation) does help. As others provide their opinion, perhaps there will be a consensus one way or the other.

Tim,

I read section 55-513 and do not believe that it applies to assessments. It appears that the intent was to apply this section only to violations of rules and regulations.

{Rant}

I saw the requirement to send notices by certified mail with return receipt. I have never figured out why we need return receipts. You can send certified mail without requesting that the recipient sign for it. The sender has a record that he sent it and the post office tracking will prove that it was delivered as addressed. That's good enough for me and I seldom ask for a return receipt when sending by certified mail.

When you require a return receipt, the post office will not deliver the letter if no one is there to sign for it. They leave a notice that requires the recipient to pick up the mail at the post office. Many times it is not practical for that person to get to the post office when it is open, so the letter goes unclaimed and is returned to the sender. All that proves is that the recipient never received the letter, meaning that he had no notice. Kind of defeats the whole purpose of sending out a notice. (Someone sent me something by certified mail last January; we were out of town for the entire month and the letter was returned to sender as unclaimed. Had they not requested a return receipt, the letter would have been in our mail when we returned.)

In your case, since Virginia law requires certified mail with return receipt you have little choice but to do so but you might want to CYA by sending a duplicate notice either by first class mail or by certified without the return receipt.

{/Rant}

Tim - Do your late fees really exceed $50? Isn't that the threshhold that the bill references?

Had to leave for a bit. To continue:

Using the example in our earlier post:

Using my Associations numbers, on Feb 1, we had 15 people who were late. Of those 15, 1 went to 60 days late.
Therefore, using the same Example:

Current process: Cost $45 (postage/printing) late charges: $117 (however we did forgive most of them)
If law applies: Cost $135 (postage/printing) late charges: $7.80 (the one person who went 60 days late)

The process increases costs incurred, increases time spent (additional hearings), and inconveniences everyone, members/directors (due to the simple process of using certified mail with return receipt)

Again, it's not the cost of the charges (we forgive most of the charges anyway), it's the process of dealing with certified mail (takes extra time to mail and, extra time in line if having to pick one up that was returned) and the inconvenience for everyone involved to hold a hearing for a minor mistake of mailing the check late.

Our Association is rather fortunate. Out of 130 lots, we have 3 lots who are always late. Currently, those are typically brought current once they know that we are ready to send the issue to our attorney. Last year, we never had to even consider that. This year, we have one. However, we do have a lot of lots who simply pay late. From January to May 1, this year, as Treasurer, I have sent 30 letters for being 30 days late. Of those 30, 5 went 60 days late. Of those 5, 1 went 90 days or more late. For that one lot, we had to send certified letters and discuss it at a Board meeting (which the member could have, but did not attend).

As I said, our Association is a rather fortunate Association with minimal delinquent accounts. If this law applies to delinquent accounts, then I would estimate an additional cost of appox. $400 per year with
appox. an additional hour per month required by the Treasurer (self managed - no bookkeeper) to deal with the certified mail.

Richard,

Our attorney puts out a newsletter about new laws. This letter will likely come out in June or July (since the law doesn't take affect until July 1).

I agree with you that I may simply be reading more into this than there is.

I've also asked someone who is involved in CAI to check with our local chapter if this was an unintended consequence of this amendment to the law (as CAI was one who lobbied for it - but I know what they actually lobbied for was modified by the legislature). However, it could be a few weeks for that response.

Even if I am correct and the statute could be construed this way, it's likely that it won't be challenged to see how the courts would rule anytime soon. As Mike pointed out, it's rare that Directors take the time to read the changing statutes and rarer that members will. Additionally, those who would challenge the procedure (likely the lack of holding a hearing) would probably be delinquent in their assessment anyway.