Delinquent Dues

Started by TomT3 • 14 replies • 2249 views

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TomT3 (Florida)
Posts: 4

Posted:

Can someone out there provide me an answer to the following question: Is it legal and can an HOA report association members that are delinquent in their annual dues payment to the Credit Bureau? I chair the Covenant Compliance Committee for my HOA and I would like to have that tool for encouraging members that are delinquent to "pay up" or the HOA Board will report to the Credit Bureau. I think it is a valid strategy, but don't know if its allowed in Florida. Thanks! I would appreciate any feedback.

Tom T
An HOA in Panama City, FL

TimB4 (Tennessee)
Posts: 21,059

Posted:

Tom,

Mind you, I am not an attorney but I know of no legality that would prevent this from happening. However, it is typically easier for the Association to let a collection agency or your attorney (when you file the lien) to do this than for the Association to do it.

I have a friend who owns a business and when the accountant starting placing "failure to pay may affect your credit report" found a decrease in delinquencies. He told me that they won't actually take the time to make the report (hence the use of the word "may") but having that sentence on the bill apparently does help.

NpS (Pennsylvania)
Posts: 4,216

Posted:

Our HOA has discussed this option from time to time.

To date, we haven't gone there because we are concerned about liability in the event that there is an error in our billing or a delay in removing a delinquency that has been satisfied.

These potential problems could be made worse by the bulk handling mentality of a collection agency or a credit reporting agency.

Then again, the idea keeps popping up in our discussions because we know it would get results. If the credit card companies report and we don't, we know who is going to get paid first when things get tight.

Sikubali jukumu. Read all posts at your own risk.

GlenL (Ohio)
Posts: 5,491

Posted:

Tom, like Tim I'm not an attorney but the HOA should consult with one before doing this, while HOAs are generally exempt from the Fair Debt Collection Practices Act, using collection agents or reporting to the Credit Bureaus may bring it into play.

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

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Tom

As Tim said:

"failure to pay may affect your credit report"

It is all in the word "MAY". This does not mean the BOD must and/or can do anything with ones credit report.

CyrstalB (Maryland)
Posts: 457

Posted:

Why wouldn't you just place a lien on the property instead? Threatening and then reporting to a credit agency is not going to get the money owed, it will only inflame the situation. Make it easy on yourselves and hire an attorney to take care of it and then you don't have to worry as much.

I don't understand why a BOD doesn't just move forward with what the documents say when you don't pay.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

All

We have tried several ways to collect back dues in that we talk to people, try and arrange payment plans, waive late fees,etc. but it gets to a point where they ignore us or do not honor their promises. We felt that by this time we had no "weight" with them so we needed an alternative with more teeth in it.

We use a real estate law firm that has a division within it that specializes in owner associations. They use a multi step process to collect. To the best of my recollection it works like this:

1. Our first attempts are to collect any owed money ourselves so after 30 and 60 days late, we send polite letters from the HOA even offering to make payment arrangements.

In the next quarterly bill, the HOA sends notice reminding the owner they are 90 days late and asks for back and present dues or a payment schedule acceptable to the HOA within 30 days or we will turn the account over to a law firm for collection. It is now almost 150 days since we have seen a payment. If no arrangements are made, we send it on to the law firm.

2. The law firm sends a letter informing the homeowner that they have received the case and are prepared to file a lien and commence to foreclose unless owed dues are paid and/or a payment schedule is arranged with the HOA within 30 days. The firm charges the HOA $65.00 for this letter.

The law/collection firm then backs off and awaits further notification from the BOD. It is now back in the BOD's lap. The BOD then tries once again to reach an agreement. In several cases the letter from the lawyers was enough for owners to make arrangements to pay. If no arrangements are made we turn it back over to the law/collection firm again. We control the timing of when we turn it back over to the law firm.

3. Law/collection firm sends a letter saying a lien has been filed (which it has) and foreclosure has commenced. It will now cost the homeowner $495.00 (to the law firm) plus owed dues to the HOA to stop the process. There is no charge to the HOA but the homeowner must pay the $495.00 to the law firm and back dues to the HOA to be current.

4. If no response within 60 days, the law/collection firm files some paperwork with the court about foreclosure and notifies the homeowner that foreclosure has begun and it will cost $995.00 (to the law firm) plus back dues to the HOA to stop the process.

5. The next step would be the HOA pays the law firm $400.00 and foreclosure commences. The process is completely stoppable at this point by the HOA, the HOA would still have a lien, and the law/collection firm is owed $995.00

We do not want to be in the real estate business and we have no desire to foreclose. I am not saying all should not foreclose but our decision is not to and as such, we have not gone past Step 3. I advise we never do.

Hope this helps.

SheliaH (Indiana)
Posts: 6,964

Posted:

Quote:

Posted By GlenL on 09/28/2014 4:03 PM
Tom, like Tim I'm not an attorney but the HOA should consult with one before doing this, while HOAs are generally exempt from the Fair Debt Collection Practices Act, using collection agents or reporting to the Credit Bureaus may bring it into play.

I keep hearing this, but I've also read recent articles that state that HOAs CAN be held to the Fair Debt Collection Practices Act. When I was treasurer of my HOA Board, I always behaved as if we were (the prospect of paying heavy, heavy fines for non-compliance was enough for us to make sure we had all our ducks in a row).

That said, I've heard that the credit bureaus won't necessarily put this type of information on the account - something about a HOA not having an account with the bureaus in the same way that a conventional creditor, such as a bank or apartment complex would.

However, I did read a recent article from Transunion's e-newsletter that said it and other agencies are beginning to keep track of rent payments - if frequently late, that could affect one's credit score. I don't have the e-newsletter anymore, but here's an article from the Huffington Post that said the same thing:

http://www.huffingtonpost.com/jeff-golding/slacking-on-rent-payments_b_3429978.html

It seems to me if rental payments can be counted like this, why not HOA assessments?

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Typically HOA's have no reason or right to collect owner's Social Security numbers nor of renters of owners. Which is the process used to report to credit bureaus most of the time. The HOA can file a lien which can show up once the owner tries to sell the home. Worst case scenario home goes into foreclosure by the HOA and that also may show up after the process is done.

You do not need to report me to the credit bureau to make me act. Just file a lien and I will be contacting the HOA on it.

Former HOA President

RichardP13 (California)
Posts: 1,767

Posted:

HOA's could IF they had a reporting contract with the credit bureaus, which may in fact be cost prohibitive. But if they wanted, there is no reason you couldn't report to the bureaus and file a lien at the same time.

KerryL1 (California)
Posts: 14,550

Posted:

I can't answer your specific question, TomT., but if your CC&Rs permit it, you may withhold recreational amenities from delinquents with proper notice, etc., This works well for us because we have some nice amenities to suspend and ways to enforce the suspension.

If your HOA may suspend such privileges, make sure your follow the exact guidelines in your own documents or in your state's laws.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Kerry is correct on withholding amenities and this should be an early step. As we have none, there is nothing we can withhold.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Kerry is correct on withholding amenities and this should be an early step. As we have none, there is nothing we can withhold.

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