Collecting unpaid dues

How much are your dues? For us we had a 6 month we liened policy. That is because our dues were $50 a month. The 6 month point would have been $300. It cost about $400 to file a lien. We added on the $20 a month late fee and the allowable interest rate (6%) at the 6 months point. It was basically the break even point of expense. We could also negotiate by dropping the late fees and interest if they paid the filling and back dues.

We did NOT CONSIDER foreclosure until a year of back dues. If the bank already foreclosing, we kept the lien on. You can NOT foreclose on someone on active duty. I found just leaving a lien on a home is a no foul no harm situation for some long term situations. It does accumulate but may need refiled for certain time limits. Check with your county/state.

I found a solid policy of when we liened for back dues helped. Once people knew we were serious and followed up. They tended to do something. Even setting up payment plans to avoid it.

BTW: A lawsuit would still left you in the same condition you are now. The person can sell their home and move off never paying. A lien holds them to the house and has to be paid to sell.

D'OH

The corporate directors need to establish a policy re: when to actually RECORD the lien which the nonpayment of assessment created.

A fine, but legal, distinction.

The purchaser has no way of satisfying the lien at 'closing' unless it had been recorded.

If recorded, the collection rate would be almost 100/100.

Melissa,

Our dues are almost $800 a year, paid in two installments 6 months apart.

We still have a terrible time with collections, at least in my opinion. For the last few years our board has "set aside" over $5000 in what they call doubtful acts money to account for nonpayment of dues. We usually eat into that at least several thousand a year. This unpaid dues as well as last years is counted against that balance. But still, my feeling is if the board has the means to avoid this type of unnecessary loss they should do it.

Cost to file a lien through the courts here is about $66, which our governing documents allow us to add to the assessment. That is not hurting anyone substantially, but it does provide an incentive to compel a homeowner to pay on time in my view.

Here is what our Declaration says on the issue. When asked at the March board meeting why the board does not charge interest on the overdue dues like our Declaration says "shall" happen, our board at first didn't know they could or should, but then had the attitude that it wouldn't be nice to add additional costs to a delinquent homeowner (even though they charge them late fees). Then the treasurer tried to make me look foolish by moving to charge "0%" interest, which the board was satisfied with.

Here is what our Declaration says on the issue:

Section 5.08. Non-Payment of Assessment. If an Annual Assessment,
or installment thereof, is not paid on the due date, established pursuant to
Section 5.03 hereof, then the balance of the annual assessment shall be deemed
delinquent. Any delinquent assessment payment, together with such interest
thereon, accelerated future installments, if any, and cost of collection thereof as
herein provided, shall thereupon become a continuing lien on the property which shall bind such property in the hands of the then Owner and such Owner's heirs,
devisees, personal representatives, successors and assigns. In addition to the
lien rights, the personal obligation of the then Owner to pay such assessment
shall remain such Owner's personal obligation and shall not pass to such Owner's
successors in title unless expressly assumed by them.
If the Assessment or any installment thereof, is not paid within ten (10)
days after the due date, (i) the Association may impose a late charge or charges
in such amount or amounts as the Board of Directors deems reasonable, not to
exceed 2% per month of the amount of such overdue Assessment or installment
thereof or $20.00 per month, whichever is greater, and, if not paid within thirty
(30) days after the due date; (ii) the Assessment shall bear interest from the due
date at such rate as may be fixed by the Board of Directors from time to time,
such rate not to exceed the judgment rate of interest then imposed by law; (iii) the
Board of Directors may accelerate the remaining installments, if any, of such
Assessment upon notice thereof to the Owner; and (iv) the Association may bring
legal action against the Owner personally obligated to pay the same or foreclose
the lien against the property, and the cost of such proceedings, including
reasonable attorneys' fees, shall be added to the amount of such Assessments,
accelerated installments, if any, late charges and interest.
Once an Assessment is deemed delinquent as described above, any
payments received from the Owner shall be applied in the following order:
Attorney's fees, other costs of collection, late charges, interest, and then the
delinquent Assessment or installments thereof beginning with the amounts past
due for the longest period.
Dissatisfaction with the quantity or quality of maintenance services
furnished by the Association shall, under no circumstances, entitle any Lot Owner
to withhold or fail to pay the Assessments due to the Association for the Lot or
Lots owned by such Owner.
There is hereby created a lien, with power of sale, on each and every Lot
within the Development to secure payment to the Association of any and all
assessments levied against any and all Owners of such Lots under the
Restrictions, together with interest thereon. If any assessment remains
delinquent for thirty (30) days the Association may elect to record in the deed
records a lien on behalf of the Association against the Lot of the defaulting Owner
in the appropriate Clerk's office upon approval of the Board of Directors. Such a
claim of lien shall be executed by any officer or managing agent of the
Association, and shall contain substantially the following information:
24
(i) The name of the delinquent Owner;
(ii) The legal description and street address of the Lot against
which claim of lien is made;
(iii) The total amount claimed to be due and owing for the amount
of the delinquency, interest thereon, collection costs, and
reasonable attorney's fees (with any proper offset thereof);
(iv) That the claim of lien is made by the Association pursuant to
this Declaration; and
(v) That a lien is claimed against said Lot in an amount equal to
the amount stated.
Upon recordation of a duly executed original or copy of such a claim of lien,
and mailing a copy thereof to said Owner, the lien claimed therein shall
immediately attach and become effective in favor of the Association as a lien
upon the Lot against which such assessment was levied. Such a lien shall have a
priority over all liens or claims created subsequent to the recordation of the claim
of lien thereof, except only tax liens for real property taxes on any Lot,
assessments on any Lot in favor of any municipal or other governmental
assessing unit, and the liens which are specifically described hereinafter. Any
such lien may be foreclosed by appropriate action in court or in the manner
provided by law for the foreclosure of a realty mortgage or trust deed as set forth
by the laws of the Commonwealth of Virginia, as the same may be changed or
amended. The lien provided for herein shall be in favor of the Association and
shall be for the benefit of all other Lot Owners. The Association shall have the
power to bid in at any foreclosure sale and to purchase, acquire, hold, lease,
mortgage, and convey such Lot. In the event such foreclosure is by action in
court, reasonable attorney's fees, court costs, title search fees, interest, and all
other costs and expenses shall be allowed to the extent permitted by law. Each
Owner, by becoming an Owner of a Lot in the Development, hereby expressly
waives any objection to the enforcement and foreclosure of this lien in this
manner.

from YOUR documents:

This is an interesting approach Chris, but my view would be the filed lien protects the association against loss, the "threat" of a lawsuit, although seemingly effective, doesn't stop anyone from selling and making a quick get away.

For others, as I originally said, I'm aware that filing the lien would have avoided these losses. Said unpaid dues would then have to be taken care of at closing. Looks like most agree that the board should have a policy in place whereby a lien is filed after a certain amount of time without any more letters saying please pay.

I like your success rate though Chris.

What are everyone's views on the charging of interest on unpaid balances? Our Declaration says interest "shall" start to accrue?

I know it means must...but our board says no, and they can choose to charge 0 percent interst. I'm not making this up.

While I disagree with zero percent interest, it is within the board's discretion to set it at that rate. I read nothing that requires the board to charge any specific rate. There is no stated lower limit and the upper limit is "the judgment rate of interest then imposed by law."

Our documents indicate that we charge interest after the payment is late (10 days). Since we also charge a $15 late fee per our documents we have taken a bit of a softer stance and don't charge interest until the 90th day past due which is when a lawsuit is filed. Our documents specify that our rate should be between 9 and 18 percent. We charge 12 percent.

good advice above

but

consider petitioning the court for receivership

if

you really like your home and its' location

or

consider relocating

Are there no estoppel letters requested by the banks in your state?

Serving as Treasurer in my Association (which is also located in VA) I can assure you that prior to every closing, I have been contacted by the closing company or attorney (unless it was sold/transferred to family member) to complete one of their forms asking:

Amount of assessment
Frequency of payment
When is the next payment due
Amount dues are in arrears (if any)
Amount due for disclosure package
Any special assessment and amount

Therefore, even without a lien, the Association has an opportunity to collect at closing if they were asked and completed the paperwork properly.


It should only be used as a last resort. The best practice is to have a policy in place and follow it to the letter. Ours is:

1) 30 days - letter
2) 60 days - letter
3) 90 days - letter via certified & first class mail
4) 120 days - letter of Agenda Item stating the Board is considering escalting collection efforts
5) After Bd meeting - letter of results of meeting - via certified & first class mail
(typically saying if account is brought current by mm/dd/yyyy, the issue will not go to collections
6) 150 days - Issue turned over to attorney


You should have a policy - I agree.

Lien after 30 days, in my opinion, is too extreme. The fault may be poor bookkeeping by the Association. You need time to provide them an opportunity to fix that.

Perhaps you can draft such a policy and present it to the Board for their consideration.


It happens. Perhaps the Board is overworked and misses things until the timing is too late. This can be fixed by offering your time and energy either now to assist the Board or as a candidate at the next election.

We have one member we sent to our attorney last year for lack of payment. They paid, including late charges and legal costs, sometime in December. Guess what, we are doing it again this year. This example shows that some people won't or, due to circumstances, are unable to change.


I think you need to gather more information first.

Being treasurer with a medium sized Association (we have 130 lots) takes a lot of time without assistance from others. It could simply be a matter of needing help and not realizing it.

As discussed earlier, there should be a policy on collection of assessments.


Collection agencies typically do not work with Association issues.

The issue needs to be addressed with the associations attorney. Lien policies vary by county. In Fairfax County Associations are heading to court for a judgement prior to liening (due to case law that I can't find at the moment). Keep in mind that it costs to use attorneys up front (we had $450 worth of attorney fees/legal costs that had to be paid. Yes they were collected from the owner when they paid, but if they didn't pay - we would have spent that money plus more, going after them)

Why is the lawyer doing this? It seems like an extra and needless expense. In most states anyone can create and print the form and information and anyone may deliver it to the recorder's office. Is there a statute that requires a lawyer's signature instead of an officer's?

OOPS

Did not read before I spoke.

Yes the PM or the BOD can file a lien (in SC for about $50) but our Lawyer's Legal Assistant (she has some fancy title like Foreclosure Specialist) does it for a nominal cost and it does begin a paper trail for further action.

I did not get into details but there are late payment letters automatically generated and sent by the PM so the lien is a later step. As an example if you do not make the quarterly payment by the 15th of the month after it is due you get a notice letter. If no payment then 30 days later you get a letter with a late payment charge.

Our limited experience has shown that letters from most anybody do not have the effect that one from a lawyer has. We also believe that once one is 6 months late there are issues and collection efforts have to be stepped up. We consider the lawyers fee a small price to pay.

Why waive? Even at the maximum 6% apr allowed in VA we're talking about less than $50 a year.

I didn't say to waive. I simply pointed out the proper way to do things if your Board didn't want to charge the interest.

In my view this is a textbook way to handle your situation Allison. When done openly everyone can see and make sense of the circumstances...when done secretly all homeowners can do is speculate.

I don't see how a board can reappoint itself to another term. Surely your governing docs call for an election. If so, does the HOA mail out absentee ballots or proxies? If they do then you could merely visit every home and collect enough proxies to make a quorum. Also surely your governing documents provide for a way to remove the board via a vote of the membership, it would take some legwork but would be worth it it you want a board that follows the governing docs.

When our association itself tried collecting late dues, few paid attention even when we threatened liens. When we hired a lawyer/collection firm and they started doing their thing (threats, liens, foreclosure, credit reporting, etc.), 5 of our 7 delinquent owners paid attention and made payment arrangements.

To give you an example. We have one owner who has not paid dues in 4 years so they owed $2,400. They basically ignored the HOA requests. Granted the HOA did not play tough. The lawyer/collection firm put it all together and they owed $6,000. Past dues, late fees, interest, lawyer costs, etc. It took only one letter for the law firm and the owner made payment arrangements.

Get tough and get tough early.

I've alerted mods to the rash of spam postings by TimP6

Crossposting the same thing to a bunch of existing threads is practically a definition of spam.