HOA Member refusing to pay dues

Started by MaridaN • 26 replies • 1499 views

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MaridaN
Posts: 13

Posted:

Hi,

We have an HOA member who refuses to pay their HOA dues. The dues are $150 a month, and they are now 13 months behind. We are only a 4 house community, and we need them to participate in order to keep utilities in the common area going. We have dipped into our reserve to cover what we can while we try to get them to pay their dues, and now our reserve is getting low.

What are some of the options we have to force this member to pay their dues?

SheliaH (Indiana)
Posts: 6,967

Posted:

Take legal action against them - if they had a financial issue, they could have told you and negotiated a payment plan, but since they didn't, it's time to play hardball. Right now, they probably don't think you're serious because you've sat on this for 13 months. That is the first moral of the story - never let delinquencies fester, otherwise, things can escalate to the point it will be nearly impossible for you to collect.

You can get an attorney to give you some basic tips on what to do if a lawsuit doesn't work or he/she can send a nastygram on your behalf (if you win your case, you can ask for reimbursement of the association's legal costs and attorneys fees). Since there are only 4 units, you may be able to do this in small claims court, depending on how much is owed. Check your city or county website to see if there's basic information on where to file, how much are the fees, etc.

Read your documents to see what it says about homeowner's obligations to pay assessments - you need to bring that up to the judge so the homeowner will be forced to explain why he/she hasn't paid his/her fair share. Sometimes a lawsuit or the threat thereof is enough to bring these people to heel. Good luck and hang on to your knickers - this may get worse before it gets better.

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

TimB4 (Virginia)
Posts: 20,986

Posted:

Marida,

At this point in time, if they don't want to pay assessments, then legal action is the only recourse.
Move quickly as there may be a time frame for filing a lien.

DouglasK1 (Florida)
Posts: 2,038

Posted:

Note that ultimately if other options don't work, you may have the option to foreclose.

Escaped former treasurer and director of a self managed association.

MaridaN
Posts: 13

Posted:

We've been taking so long to pursue it legally because everything we ask they would pay something. But, I am now the new president of this HOA and I am giving them a final notice then we will pursue with legal action if the fees are not paid in full in 5 business days.

I have a letter written out, does anyone mind reading it and giving some feedback?

Dear Homeowner:

Our records indicate that your association fees are 13 months past due for your property located at xxxxxxx. The HOA treasurer have discussed and have provided xxxxxxx. (representative for xxxxxx), the statements on Sun. Feb. 18, 2018 showing the current status of your account. A verbal agreement was made by xxxxxxxxxx that the past due amount will be deposited immediately the following business day on Tues. Feb. 20, 2018 (Mon. Feb. 19, 2018 is a holiday).

Since the deposit has not been made in a timely manner, the HOA ask that you pay the total amount due including any late fees and interest fees, upon receipt of this notice.

If you make the deposit at the local branch please give a copy of the deposit slip to the HOA treasurer.

Please make check payable to: "xxxxxxxxxxxx"

Amount Due: $1,950
Late Fees (10%): $195
Interest Incurred (3%): $58.50
Please pay this amount: $2,203.50

Failure to make payment in full within 5 days from the date of this letter, the HOA will proceed with the association's delinquency policy and turn this account over to the association's attorney. A lien will be filed against your property and begin any legal proceedings. You will be assessed all legal fees and any costs associated with termination fees, activation fees, late fees, and returned check fees of services including but not limited to HOA utilities and maintenance of the common areas as well as any loss of income to any board member having to take time off to tend to this matter.

MelissaP1 (Alabama)
Posts: 13,734

Posted:

I would NOT file a lawsuit to collect the money. It's much better to file a lien. Less expensive and more teeth. The lien covers the cost of hiring a lawyer to file, dues owed, and interest. It also accumulates over time. The owner can't sell till it's paid. A lawsuit the owner can move without ever paying a dime. Nothing really stopping them from paying up a settlement as the HOA has to be pretty pro-active to collect.

Plus make sure your HOA puts in a policy on what timeline is for lien/foreclosure. We do a lien at 6 months and CONSIDER foreclosure at 1 year. We never foreclose on a house that is in bank foreclosure. Nothing wrong with keeping a lien on for longer than a year. Just make sure it stays active. It may need renewed after a few years.

Former HOA President

JohnC46 (South Carolina)
Posts: 14,230

Posted:

First bit of advice is stop playing lawyer and turn it over to your lawyer now.

Second bit of advice is drop the last (bold) part of the letter. It is playing lawyer.

Failure to make payment in full within 5 days from the date of this letter, the HOA will proceed with the association's delinquency policy and turn this account over to the association's attorney.

A lien will be filed against your property and begin any legal proceedings. You will be assessed all legal fees and any costs associated with termination fees, activation fees, late fees, and returned check fees of services including but not limited to HOA utilities and maintenance of the common areas as well as any loss of income to any board member having to take time off to tend to this matter.

MaridaN
Posts: 13

Posted:

Thank you for the advice. I will research on putting a lien on the house if they dues are not paid in the next 5 days.

What can I do if the same family uses the common area space to store their personal belongings? They are turning the common area "playground", into their own personal dumping grounds. They have junk left out all over that area.

They have been notified by the previous HOA president but nothing was done. I am now the new president and really trying to put my foot down on this family.

MaridaN
Posts: 13

Posted:

We really don't have an attorney, and hiring an attorney is way out of our reach financially. Is their a better way to word it? I don't want to play lawyer, I just want to make it firm and make them be responsible for all fees involved.

MaridaN
Posts: 13

Posted:

Quote:

Posted By MelissaP1 on 02/20/2018 3:58 PM
I would NOT file a lawsuit to collect the money. It's much better to file a lien. Less expensive and more teeth. The lien covers the cost of hiring a lawyer to file, dues owed, and interest. It also accumulates over time. The owner can't sell till it's paid. A lawsuit the owner can move without ever paying a dime. Nothing really stopping them from paying up a settlement as the HOA has to be pretty pro-active to collect.

Plus make sure your HOA puts in a policy on what timeline is for lien/foreclosure. We do a lien at 6 months and CONSIDER foreclosure at 1 year. We never foreclose on a house that is in bank foreclosure. Nothing wrong with keeping a lien on for longer than a year. Just make sure it stays active. It may need renewed after a few years.

I was told that if I were to put a lien, on their house it would have some adverse affects on the other homes that are in good standing. Is this true?

MelissaP1 (Alabama)
Posts: 13,734

Posted:

You may or may not need a lawyer to file a lien. That is up to your state/county. Plus some legal services offer this at a set rate. Send the letter certified. Make sure to put it to the HOA address. IF it comes back to the HOA unopened do NOT open it! Save it for court. Need to keep it unopened to show it's not been accepted/returned upon delivery.

Don't see any issues with sending the certified letter with a timeline to pay in 30 days. I would kind of follow the same protocol one would follow if evicting a tenant. The first notice is the intent of placing a lien. The 2nd notice the actual action of placing the lien. 3rd notice a copy of the lien.

Keep in mind the process takes time to process. As for the common area violations... Your HOA has to establish a "fining schedule" for violations. It can't just arbitrarily pull out a fine/punishment out of the sky. It has to be established and understood by all members what fines are for what violations. Otherwise, it's selective enforcement argument.

Welcome to being President! Best advice: Make the job part of your DNA. Your going to live/breath HOA while you run it. Accept it do not fight it. You will find a balance and calmness if you don't fight within yourself. Follow and read the rules. Bring them to every meeting. Don't answer till the answer can be referenced in the rules. Don't be afraid to delay an answer till it can be fully researched.

You can do this!

Former HOA President

MelissaP1 (Alabama)
Posts: 13,734

Posted:

A lien does not effect home values of the other homes. What happens is that there is a HUD form that is required by some loan packages. (You will be asked as president to fill it out prior to closing). It's has about 25 questions on it. Like is the HOA Fee simple? How many homes? How many behind in dues? Do you have any lawsuits/liens/foreclosures? Percentage of Renters?

This is basically a "HOA Appraisal". The bank uses this to assess it's risk in loaning the money. The higher the risk, the higher refinance rate/less loan packages available. Basically a person may not be able to get a FHA loan. Rental percentage is capped at like 50% or less. (May not be correct percentage but you get the idea). Any lawsuits or outstanding debts can also play a bit of a role in the appraisal.

So a lien is actually a good thing as it shows your HOA is taking action to collect the money. A lawsuit is way more damaging to a HOA than a lien/foreclosure process. The bank will look at a lien/foreclosure more favorably as that is what they do. Plus in a foreclosure they get paid first and foremost. A lawsuit isn't a guarantee and high risk.

Hope this helps clear it up. Lien is good idea all around over a lawsuit. A HOA doesn't even have the right to one's social security number. Which can make it more difficult to collect.

Former HOA President

GenoS
Posts: 4,262

Posted:

Quote:

Posted By MaridaN on 02/20/2018 1:48 PM
You will be assessed all legal fees and any costs associated with termination fees, activation fees, late fees, and returned check fees of services including but not limited to HOA utilities and maintenance of the common areas as well as any loss of income to any board member having to take time off to tend to this matter.

That last part in bold isn't gonna fly. You're going to ask a judge to reimburse directors for time spent doing their jobs? Good luck with that. That naivite alone shows that you need an attorney to follow up on the collections/lien/foreclosure procedure. Even if you legally don't need an attorney for this, that statement demonstrates why you should hire one anyway.

Quote:

Posted By MaridaN on 02/20/2018 4:53 PM
We really don't have an attorney, and hiring an attorney is way out of our reach financially.

Even if an attorney ends up costing you more than the $2,000 you're looking to collect from the delinquent owner, in my opinion you're skating on thin ice if you proceed with this on your own. In the end, you should be able to collect back upir legal costs and fees from the delinquent owner.

MaridaN
Posts: 13

Posted:

Thank you everyone. I'll take all your advice into consideration.

TimB4 (Virginia)
Posts: 20,986

Posted:

Marida,

A lien won't get you the money until the house is sold and it won't make them start paying.

Send the demand letter. I would also take the time to include details of the account (you will need this for the attorney anyway):

Date Assessment Due amount total
Date (payment) amount total
etc.

Personally, I like to wait until the end of the month for payment and specify on the 1st, it will be turned over for collections. Add that any costs of collections (attorney fees, court costs, etc.) will be assessed to them and added to the amount owed.

In this instance, I would allow through March 30th. (gives them time if needed to get the money).

Every Association has one (someone who doesn't pay or doesn't pay on time). It's a shame your association is so small that it's harder to absorb the costs.
You also need to update your collections policy so the issue doesn't take so long.

MaridaN
Posts: 13

Posted:

Quote:

Posted By TimB4 on 02/21/2018 7:25 AM
Marida,

A lien won't get you the money until the house is sold and it won't make them start paying.

Send the demand letter. I would also take the time to include details of the account (you will need this for the attorney anyway):

Date Assessment Due amount total
Date (payment) amount total
etc.

Personally, I like to wait until the end of the month for payment and specify on the 1st, it will be turned over for collections. Add that any costs of collections (attorney fees, court costs, etc.) will be assessed to them and added to the amount owed.

In this instance, I would allow through March 30th. (gives them time if needed to get the money).

Every Association has one (someone who doesn't pay or doesn't pay on time). It's a shame your association is so small that it's harder to absorb the costs.
You also need to update your collections policy so the issue doesn't take so long.

They have been notified since January 1st, and many times before that. Its not that they don't have the funds, its that they refuse to pay. Reason being is because they don't want a gardener, they don't want electricity to turn on the lights on their side of the common area, they don't want water sprinklers turned on, they don't want insurance for the common area. But, they do want to keep using the shared driveway, they do want to keep using the shared trash bin, they want to continue parking illegally in the shared driveway, and they do want to keep using the common area "park" for their own personal storage.

The parking illegally can be easily taken cared of by calling the fire department because the driveway is a fire lane. We don't want to get the authorities involved because we are such a small community and this should be an easy "hey, you can't park here because its a fire lane", but it looks like the authorities will have to be contacted.

TimB4 (Virginia)
Posts: 20,986

Posted:

Informed in writing?

Our policy is notification letters go out at the first of the month:

30 day letter
60 day letter
90 day letter via certified mail and first class mail (as some won't pick up certified mail)
120 day letter advising the issue will be turned over for collections if not paid in full by mm/dd/yyy (end of the month)

Once it's turned over to the attorney, the Association has no further communications with them.

Keep in mind, the attorney will repeat the letter process to make sure all procedures are properly followed.

When you hire an attorney, make sure that you inform them to include the amount of removing a lien and closing the case as part of the legal fees (otherwise the Association may end up paying for them after the issue is resolved).
Keep in mind that you will likely have to pay legal expenses up front and get reimbursed as the account is caught up.

From what you post, I suspect that once the first letter from the attorney shows up the individuals will know your serious and will pay if they are able.

JohnC46 (South Carolina)
Posts: 14,230

Posted:

Tim raised a good point. In the past our delinquent owners paid little attention to dunning letters from the association nor the MC. Once we turned it over to our attorney and a letter came from him mentioning liens, credit reporting, and foreclosure quite a few ponied up their back dues.

RichardP13
Posts: 3,836

Posted:

File a lien. It is inexpensive and does not require an attorney, but there are specific procedures that MUST be followed. Take to Small Claim Court. Filing fee is $60.00.

MaridaN
Posts: 13

Posted:

Thank you guys for all the input. The day I was about to mail out a demand letter, I checked the HOA bank account and they actually made a large deposit, not all but a good amount.

My question now is, do I just hold off and see if the remaining $500 will be paid or should I still pursue with a lien?

JohnC46 (South Carolina)
Posts: 14,230

Posted:

Mar

They have paid $1,450 of $1,950 so I might wait 30 days to see if they catch up.,

DouglasM6
Posts: 721

Posted:

For me, it's important to not get too involved personally in the debt collecting. By personally I mean talking to them, asking for payment, having them give excuses, etc. Once they are that late, send them a certified letter that states their account will be turned over to a collections attorney on xx/xx/2018 if not paid in full, and then follow through. Boards of Directors are not collection agents.

TimB4 (Virginia)
Posts: 20,986

Posted:

Quote:

Posted By DouglasM6 on 02/26/2018 9:12 AM
For me, it's important to not get too involved personally in the debt collecting. By personally I mean talking to them, asking for payment, having them give excuses, etc. Once they are that late, send them a certified letter that states their account will be turned over to a collections attorney on xx/xx/2018 if not paid in full, and then follow through. Boards of Directors are not collection agents.

Doug,

Easy for a Treasurer to do in a large Association.
Not so easy when it's a small Association (like the OPs - where there is only 4) or if it's a neighbor.

Again, I agree but it can be very difficult when it's someone you see everyday and your name is on the letter.

DouglasM6
Posts: 721

Posted:

Quote:

Posted By TimB4 on 02/26/2018 11:08 AM

Ours is 20 homes. I do not ask the treasurer to handle these types of things. I make the decisions as the president. We have some people who are behind on their assessments and it really does work better laying out the rules and following them. The first sentence in every letter I send goes something like:

"sending a neighbor to collections or suing a neighbor is the last thing in the world that any of us want to do, but....."

I'm simply not going to waste my time trying to get people to pay their bills. Once they see the lawyers fees and late fees added on, it should motivate them to pay on time.

TimB4 (Virginia)
Posts: 20,986

Posted:

Quote:

Posted By MaridaN on 02/26/2018 8:18 AM

My question now is, do I just hold off and see if the remaining $500 will be paid or should I still pursue with a lien?

In my opinion, you should send a letter thanking them for their payment and point out that the partial payment leaves a balance due.

Example:

Dear Mr. & Mrs X,

This is to acknowledge your payment of $xxx.xx received today. Thank you.

With this payment, your account has a balance due of $ xx.xx
Details of your account are on the reverse of this page.

To avoid additional charges, the full amount must be received by mm/dd/yyyy.

TimB4 (Virginia)
Posts: 20,986

Posted:

Quote:

Posted By DouglasM6 on 02/26/2018 4:36 PM

I'm simply not going to waste my time trying to get people to pay their bills. Once they see the lawyers fees and late fees added on, it should motivate them to pay on time.

Agreed.

I also like your phrasing: "sending a neighbor to collections or suing a neighbor is the last thing in the world that any of us want to do, but....." Mind if I use it as well?

Tim

DouglasM6
Posts: 721

Posted:

Help yourself! The results are two fold. It makes the neighbor realize "it's just what has to be done" and it helps the people taking the actions understand that as well.

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