Steps in collections

Started by GeorgeJ4 • 6 replies • 1903 views

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GeorgeJ4 (Ohio)
Posts: 5

Posted:

I am the President of a HOA in Ohio. When a owners gets behind in dues of at least 90 days, we first send them a collection letter. The second step is the filing of a lien against the property with a letter explain why. The next step is turning the delinquent account over to our Attorneys for collection and if need be foreclosure. In Ohio, are these the correct steps or am I missing something?

Georgej4

RogerB (Colorado)
Posts: 5,067

Posted:

GeorgeJ4, I am not familiar with Ohio statutes regarding delinquent HOA accounts. Regardless, I presume your HOA established a collection policy on delinquent accounts and provided a copy to every homeowner. If not, it is recommended that be done as the first step in the collection process. Also, before it is sent to a third party for collection in Colorado the homeowner must receive at least 30 days advanced notice with specific requirements in the "30 day letter". You could consider doing this even if there is no legal requirement to do so.

KerryL1 (California)
Posts: 14,550

Posted:

With Roger, George, first read your own documents to see if they say anything about requirements for collections. Next, read OH HOA statutes to learn what your state requires.

Glen from OH is very knowledgeable, so if you're in luck, he'll check in $ help you. there also are a couple of other posters here who're generously willing to check state's statutes.

GlenL (Ohio)
Posts: 5,491

Posted:

George as Roger stated, you should have a written enforcement policy and all homeowners should receive a copy. The only thing you left out are the enforcement fees i.e. late fees, lien fees, attorney costs etc which should be added to what the homeowner owes. In case you haven't seen the Ohio statutes on HOAs, you can view them here: http://codes.ohio.gov/orc/5312 Section 5312.12 covers liens and foreclosures.

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SheliaH (Indiana)
Posts: 6,964

Posted:

I would hope if you had any legal issues, your attorney would have told you by now, so you may want to talk to him or her. In fact, you may want to review your policy to see how effective it is - if you don't have a huge delinquency problem, what you're doing now is probably ok.

The key is not to let the balances grow too big because the larger they get, the less likely the homeowner can pay it - and the more expensive it may be to collect. Depending on how much your assessments are and how often they're paid, you may want to get the account to the attorney within 60 days instead of 90.

Here are some of the approaches our Association takes:

30 days late - 1st letter; 45 days late 2nd letter; 3rd and final letter 60 days (at that point, the homeowner has 10 days to pay, otherwise it goes to the attorneys).

If the association's property manager receives word a bankruptcy or mortgage company foreclosure is in the works, the file is referred to the attorney immediately, who will determine if anything should be done to protect the association's interests. That may be filing a proof of claim with the bankruptcy court or a lien, depending on what's going on and the chances of the association getting any money back.

Some homeowners may ask for a payment plan - our attorney will negotiate the terms, but the Board has final say on if it's approved, extended or can be amended. If the homeowner reneges on the terms, the Board can cancel it and the attorney can take whatever step is most appropriate.

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

LarryB13 (Arizona)
Posts: 4,099

Posted:

Quote:

Posted By GeorgeJ4 on 01/04/2016 8:40 AM
When a owners gets behind in dues of at least 90 days, we first send them a collection letter. The second step is the filing of a lien against the property with a letter explain why. The next step is turning the delinquent account over to our Attorneys for collection and if need be foreclosure. In Ohio, are these the correct steps or am I missing something?

You are missing a step.

Your procedure suggests that all unpaid assessments are blindly turned over to your attorney for collection and/or foreclosure. Your attorney is not a volunteer and will expect you to pay for his services regardless of how things turn out. An unpaid assessment is money that has never been in your possession. In hiring an attorney you will have to pay out real, hard, cold, cash in the hopes that you will recover those funds in the future.

You need a step between the second and the last one to evaluate whether the attorney has an chance of collecting. If you have an owner whose financial situation prevents him from paying his assessments you are not likely to ever collect the costs of obtaining a judgment against him. If his home has a mortgage, you will not be first in line to collect on your lien. If the owner has moved out and abandoned his property, you have no chance of serving him with process if you cannot find him.

My association is made up of large, mostly unimproved, rural parcels. A few years ago when I was on the board we were led to believe that we had a large number of delinquent owners and one of our board members led the charge to sue them to collect. Later on I learned that the actual number was about 75 owners out of 1600 and that the unpaid amount was about $25,000 total. I also learned too late that some of these delinquencies resulted from our management company's failure to inform some of the owners that they owed a $15 late fee for a previous year. Our lawyer charged us about $175,000 before we pulled the plug and he collected nrarly nothing for us. We paid the lawyers to draft civil complaints and file them in the proper courts but most of the delinquent owners could not be located and served. Our money was wasted and we were left in a worse position for having attempted to collect.

Had we properly evaluated each delinquency we would have found that in most cases legal action was nearly impossible and we should not have turned those accounts over to our attorneys.

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