Delinquent HOA member dues - Connecticut

I became Treasurer of our HOA two years ago. There is a homeowner who has not paid the past 10 years' homeowners dues. We plan to file a suit in small claims court as the total due is under $5,000. We have corresponded with the homeowner a number of times and they have stated their intent to pay the dues in installments but we have not seen a penny from them. I have emails stating all this. Is there a statue of limitations in Connecticut regarding how many years' dues we can collect? I can't seem to find this information in my internet research.

Thanks for your advice. I was concerned about the expense of placing a lien on the property and if it made sense but if it's true that the member would pay the related fees then that issue is resolved.

A neighboring HOA has filed small claims suits against delinquent members and has been successful. I figured it would be the least expensive route to go.

But I would like to find out if I can collect all 10 years dues or is there a statute of limitation. Previous board members have asked for the delinquent fees to no success.

Thank you. The problem with the lien is we may not see the money until they sell the house, which could be years from now. Even without a lien, the homeowner would have to be up to date with their dues before they could close on the sale of the property. Usually the purchaser's realtor or attorney calls us to confirm that the dues are paid up.

Correct. In my mind, the choice is either (1) lien and wait it out, continually adding late fees and interest as allowed by the governing documents and state law; or (2) hire a debt-collection specialized attorney, and let the attorney take her or his chunk out of the proceeds.

I understand you may not like either of these choices. The world is not perfect and so on.

Remember a foreclosure is on the filed lien. Which if the lien is unpaid in let's say a 1 year, then you can foreclose on that lien. This is something would put in the notification on the foreclosure possibilities for not paying up. Usually notification of a lien may get a small reaction but knowing they can wait it out not so much.

Plus some states do require an attorney to file a lien. However, the cost is like 4 to 500 dollars. Which is part of the lien that is to be paid back. Some legal services may do it as well instead of a full attorney. Which NO you do not need a retainer on.

What about a wage garnishment?

Ew, what a flashback from my 5 years as treasurer for our HOA board! When I joined the board, there was an owner who was three years behind at the time and throughout the 10 years I served she'd pay a little, then stop, we'd sue and file to do a foreclosure, and a day or two before, she'd declare bankruptcy which of course stops all the collection processes. Then she'd fail to do whatever the court ordered her to do, the case would be thrown out and we'd start over.

That woman lead us to strengthen our procedures, and it wasn't easy because the real estate market was going crash at the time. Today, the board has reduced a lot of the delinquencies - I don't know all the details, but I think the homeowner who was such a pain in the ass is still here (her mortgage company added the association fee to her balance).

Anyway, You will have to sue this homeowner and get a lien on the house at the very least. It's true foreclosure can be a mixed bag - sometimes that prompts the mortgage company or someone to cough up the money, but usually, the best you can hope for is to get the person out of the house. AS I see it, you may not get the money anyway, so why should that homeowner continue to get services and be subsidized by everyone else? I'd rather see the house sit there until someone responsible buys it.

If the homeowner tries bankruptcy, be sure to file a claim with the court and follow up. At one point, I attended a hearing with our attorney because I was prepared to bless out this deadbeat in front of everyone. Instead, the court announced it was throwing out her case (again - I think that was the third time at that point) and even the woman's attorney told us he'd ended his representation (guess he didn't get paid either or found her just as trifling).

It may also help to keep an eye on the property taxes. If the city or county files a lien, it'll get paid before anyone, followed by the mortgage company and then the HOA (meaning you'll still be SOL). In a few states, the first one to file gets dibs on the property, even before the mortgage company, which is rare. Our attorney once suggested buying a property tax lien that had been filed on another house - don't know how that ended because I'd left the board by then.

Oh, and the wage garnishment? That might work, but remember if the person leaves that job, you'll have to find out where he or she works and file the paperwork with the court all over again. You may even be able to garnish the rent payment if the house or condo is being rented out. The problem is, the tenant may need to sign off on the paperwork and if he or she can't or refuses to, you're dead in the water (not to mention the tenant may then leave without paying anything).

As you can see, all of these options require careful thought, so however this ends (and be prepared for it NOT ending well), you need a collection policy RIGHT NOW. Talk to your association attorney about setting it up - there are lots of old conversations on this website with good ideas (just remember they're old - if you have questions, start a new conversation because things may have changed). Once you establish the policy, send a copy to the homeowners. In fact, we do this every year when we send out the upcoming year's budget. One of the most important elements is timeliness - you have to jump on these accounts as soon as you can because the longer you wait, the less likely you'll collect anything (a pox on your predecessors on that board who let this go on without doing anything).

Good luck!

What I learned when dealing with this stuff in my community:

In my state, placing a lien is straightforward - we just ask the attorney to do so, and it is done. There is a small charge, but this is added to the delinquent owner's account along with any other collection costs. I agree with others that the collection letters should come from the association's attorney.

Moving to foreclosure is a long process, and the board must follow all legal steps to the letter if they want to be successful. They should document all of the steps taken to get the owner to pay. They want a clear history of bending over backwards to work with the owner, just in case this ends up in front of a judge who views all HOAs as bullies that mistreat owners.

Foreclose is most likely to be successful if the homeowner has stopped paying altogether. Occasional small payments will probably be interpreted by the court as the homeowner making a good faith attempt to pay the debt, whether or not that's actually the case. Fortunately for HOAs, there is a limit to how frequently someone can declare bankruptcy, so that's not a get-out-of-jail-free card for deadbeats.

If the person is paying in dribs and drabs, then going to small claims court is a reasonable option. The homeowner gets a wake-up call, the HOA gets some of their money. The downside is that the HOA is limited to the amount owed at the date of filing and it's not a permanent solution.

We dealt with two serious delinquency cases when I was on the board. One is similar to the homeowner in the OP's community: owner knows how to play the game, chronically unemployed, has filed bankruptcy once, and now appears to have some sort of disability although they haven't requested an accommodation. We are never getting rid of this person, although they got a wake-up call themselves when we successfully foreclosed on the other delinquent owner. The second one was a perfect storm of things going right: owner with attitude problem stopped paying altogether, ignored payment plans, ignored collection letters, foreclosure auction netted about $50,000 over minimum bid thanks to a hot real estate market in my area and a newbie investor buyer who overpaid (the association did make money on this one).

Good to know that in Connecticut, a condo president can bill a delinquent owner for late fees as the condo president sees fit. JimC24, by any chance did you arrange a separate account, in your name, to deposit any late fees that you do decide to bill delinquent owners? This might be helpful to your county's district attorney.

-- JimC24, are you the only one on the Board?

-- If there are a few directors on the Board, has a Board majority delegated negotiating settlements of delinquent accounts to you?

-- Or are the other directors so disinterested that everyone recognizes you as the go-to guy and the only one capable of getting this sleepy puppy (your condo association) moving?

AugustinD

There are other people on the board but generally most people are disinterested or afraid of confrontation. I don't enjoy putting other owners or my neighbors in collection - it's not fun at all and it doesn't make me very popular. One lady that was behind 18 months and would not answer our calls for a payment plan came to my door yelling and crying after she received a collection letter. It may sound like I am exceeding my authority - I wish someone would call me on it - but no one will because that would mean they would have to step up and no one wants that as long as I or someone else am doing the dirty work. We hired a property manager a few years ago - so collections now fall on him. He doesn't act as fast as I would like, but it's beats doing it myself. Haha sorry if I made it sound like I was bragging.

I agree that a lien is the first and easiest measure to collect but I strongly disagree about foreclosing on a $5,000 debt. We are talking about the forced sale of someone's home and the legal fees will likely be more than what is collected.

I don't know about Connecticut but in most states small claims courts are set up to be easy and inexpensive. In many states, lawyers are not allowed in small claims court so legal fees are minimal.

Lawsuits are how we enforce civil law. I'm not sure why you have such an aversion to them but it is misplaced. We are a nation of laws and the courts are an appropriate venue for settling legal disputes.

So, I sent a letter to the delinquent homeowner, certified mail, return receipt requested. I gave them a month to pay up their account. I said if we do not receive payment we will seek alternate means of collection. They were not at home to accept the letter and have not picked up the letter from the post office. I'm afraid they won't accept the letter. We know for a fact that they are not suffering financially. They just don't want to pay the dues. In my state, we cannot levy a lien until we take them to court. I'm thinking I go to their mortgage company first for payment (although they do not have a PUD Rider on file) and then to small claims court if I don't have success with the mortgage bank. Can I move ahead if I do not have confirmed receipt of the letter from them? According to our by-laws they cannot sell their home until the dues are all paid up so eventually we'll get payment but who knows when they will move.

Here is a link to a PUD Rider

https://www.hud.gov/sites/documents/Model_PUD_Rider_9-2014.pdf

I can save you guys $750.00, don't do it.

A lot of things have to go right for a successful foreclosure. As others noted, it costs money, so the board needs to make sure that the potential outcome justifies the expense. And state laws vary. Our attorney was our collection agent, so was involved in the process all along.

Best chance for foreclosure: homeowner has stopped paying altogether, will not communicate with the HOA, owes a significant amount (however you define "significant" in your particular case), and has not filed for bankruptcy. It also helps if a mortgage company is not involved because they will generally be the senior lien. If a mortgage company is involved, then you'll need to set a minimum auction bid high enough to clear that lien before the HOA will see any money. In this case, hope that a clueless newbie investor overpays for the property (it can happen in a hot real estate market with a property in a desirable area). Finally, there are judges out there who think that HOAs are nasty bullies beating up on poor homeowners and who will use any available reason to find against the HOA. This means that the association must follow correct procedures to the letter, and have a paper trail showing that they did everything possible to work with the homeowner before attempting to foreclose.

Small claims court can be helpful for smaller debts and in cases where the owner has at least made occasional attempts to pay. If nothing else, it will get the owner's attention. The bad thing is that you're limited to the amount owed at the time you filed your case - any subsequent debt will not be touched, and if you're dealing with someone who is a chronic non-payer, you may be looking at repeat visits to court.

Our one successful foreclosure involved:

* An owner who stopped paying altogether because she was angry at the COA (ie., the owner was clearly in the wrong and had put it in writing).

* Repeated well-documented failures by the owner to comply with a payment plan. (Payment plans can work for people who are willing to pay but have financial issues, not for those who refuse to pay - but they demonstrate the association's willingness to work with the owner, so are worth doing).

* Collection attempts handled by our attorney who complied with all legal requirements.

* Hot real estate market in my part of the world and a community that is in high demand.

* Newbie, clueless investor who overpaid (in my opinion).

The HOA needs to make sure other homeowners are aware that failing to pay dues is unacceptable. If it takes foreclosure of a deadbeat property owner, so be it. This would send a powerful message that the HOA is serious about dues and will not tolerate non payment.