What could be ramification of not charging interest, nor giving notice to delinquent assessment owners

RogerJ1 (Texas)
Posts: 550

Posted:

A small POA that has only had a few incidents of late payments of annual assessment in its 40 year history, has 6 lots, of 56 lots, not paying this year. At a recent meeting 10-4-23, the Board stated it is not charging interest (even though the Restrictions appear to state that interest must be charged for any late payments) nor has the Board filed any liens nor turned over the the delinquency to the Association attorney. The payments were due January 1 per the Restrictions, but the Board was around a month late sending bills, so I am not sure what the exact due date for 2023 is since they did not send bills until after January 1st this year - note all other Boards sent bills out in early December of each year for the next January 1st due date.

What are the ramifications for not charging interest nor filing liens for non assessment bills that are approaching a year old?

LetA (Nevada)
Posts: 2,679

Posted:

Quote:

Posted By RogerJ1 on 10/05/2023 5:15 PM
A small POA that has only had a few incidents of late payments of annual assessment in its 40 year history, has 6 lots, of 56 lots, not paying this year. At a recent meeting 10-4-23, the Board stated it is not charging interest (even though the Restrictions appear to state that interest must be charged for any late payments) nor has the Board filed any liens nor turned over the the delinquency to the Association attorney. The payments were due January 1 per the Restrictions, but the Board was around a month late sending bills, so I am not sure what the exact due date for 2023 is since they did not send bills until after January 1st this year - note all other Boards sent bills out in early December of each year for the next January 1st due date.

What are the ramifications for not charging interest nor filing liens for non assessment bills that are approaching a year old?

Well, for one 50 owners are carrying the debt of 6 deadbeat owners and that is not fair to the 50 owners. Typical budgets are drawn to assume 1% or less as bad debt. You hove 5%
as bad debt and that needs to be corrected. I would start charging interest from this date forward. Follow your governing documents. Does your governing documents have a collection
procedure? Perhaps hire a collection agency. Lien and or foreclose on the property if allowed. You defiantly should be charging interest on late payments to offset the bad debt category
on your budget.

SheliaH (Indiana)
Posts: 6,964

Posted:

What LetA said. And you've read enough conversations on this website about delinquencies to know that.

If you don't collect all the money the association is entitled to, you leave it on the table and you won't be able to charge it retroactively.

Tbe bigger problem are the lack of liens - if they aren't filed in a timely manner, tbe association risks not collecting ANY money if the house is sold. The bank gets theirs before anyone most of the time, except for the government, and the more liens in front of the association, the less likely you can collect anything.

Your association is lucky if they haven't had a lot of drama with delinquencies, and perhaps that's why they're not doing anything. They might not know they can or are afraid to be abuse it's a small community and some may raise static. However, board members have to make the hard decisions and if these peopke can't or don't want to, you and your neighbors need to make the changes. Or learn to live with the consequences.

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

SheliaH (Indiana)
Posts: 6,964

Posted:

What LetA said. And you've read enough conversations on this website about delinquencies to know that.

If you don't collect all the money the association is entitled to, you leave it on the table and you won't be able to charge it retroactively.

Tbe bigger problem are the lack of liens - if they aren't filed in a timely manner, tbe association risks not collecting ANY money if the house is sold. The bank gets theirs before anyone most of the time, except for the government, and the more liens in front of the association, the less likely you can collect anything.

Your association is lucky if they haven't had a lot of drama with delinquencies, and perhaps that's why they're not doing anything. They might not know they can or are afraid to be abuse it's a small community and some may raise static. However, board members have to make the hard decisions and if these peopke can't or don't want to, you and your neighbors need to make the changes. Or learn to live with the consequences.

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

ElleN (Idaho)
Posts: 4,420

Posted:

Quote:

Posted By RogerJ1 on 10/05/2023 5:15 PM
[snip for brevity] (even though the Restrictions appear to state that interest must be charged for any late payments)
...

What are the ramifications for not charging interest nor filing liens for non assessment bills that are approaching a year old?

An owner can sue the board and HOA for violating the covenants.

As for liens and collecting, the board has a lot of legal wiggle room on how to proceed. Chances are that, as long as the delinquent owner is being properly billed month after month (including for late fees and interest), the board does not have to do anything until the unit is sold.

CathyA3 (Ohio)
Posts: 6,299

Posted:

Keep in mind that I'm not a lawyer and I'm not in Texas, but...

* Read the exact language of your CC&Rs on assessments. My community's CC&Rs say that the association *may* charge a late fee upon an owner who fails to pay any amount assessed by the Association against him or his unit and who fails to exercise his rights under the Declaration and under the laws of my state to contest such assessment.

In other words, our board has some discretion over whether or not to charge a late fee, although the percentage is set in the Declaration.

* Regarding liens, the Declaration says "the Association *shall* have a lien upon the estate or interest of the Owner of any Unit and the appurtenant undivided interest in the Common Elements for the payment of the portion of the Common Expenses chargeable against the Unit that remains unpaid for sixty (60) days after the potion becomes due and payable. The lien is effective on the date a Certificate of Lien is filed for record in the office of the Recorder of XXXX County..." The article goes on to say that the lien is valid for 5 years from the date of filing unless it's released sooner or satisfied in the manner provided by law. It also states that all assessments, charges, interest, costs and reasonable attorneys' fees shall be the personal obligation of the person who was the owner of the Unit when these items fell due.

In other words, the board is required to file a lien. The cost is fairly modest, and the decision is pretty clear.

However, collection actions can be costly and time-consuming, and they are subject to Fair Debt Collection laws. The decisions also are nuanced. I'm in condos, and it can make little sense to spend thousands in attorney fees to go after a small amount. Yes, the Declaration states that the Owner is responsible for paying the attorney fees - but if someone isn't paying assessments, they're not going to pay attorney fees either unless we go to court. In many cases, HOAs end up eating all of the costs even if they foreclose the lien. In many states a mortgage is the prior lien, and the HOA gets whatever scraps are left. The owner may be drowning in medical debt. The owner may file for bankruptcy, which will halt the HOA's collection actions - people can play this game very skillfully and make it impossible for the HOA ever to collect what is owed.

Long story short:

Yes our board is required to file liens, but that is no guarantee we'll ever collect the money that's owed. We may end up spending even more and digging a bigger hole. It may look to an outsider as if the board is letting things slide when in fact they're letting a time-consuming legal process play out. But debt collection actions are confidential in my state, with the exception of the recorded lien which is a public record. Unit owners are entitled to know how much is outstanding in total because that's part of the monthly financials, but they're not entitled to see who owes what. They could maybe connect the dots by checking our County Recorder's website, but that doesn't allow the board to provide the details in black and white.

One of the many frustrations of owning property in a community association...

RogerJ1 (Texas)
Posts: 550

Posted:

Thank you for the input. This subdivision has gone through turmoil the last 5 years or so, mainly from new residents controlling the Board (one got on the board after living in the subdivision for only 3 weeks) because long term residents are lax. They waste money and propose radical projects, which luckily have been voted down every time by the membership.

And now the bad debt problem, which I suspect is primarily, likely solely, new residents not paying (leveraged to the hilt, current foreclosure litigation by banks on some of them, and non payment of property taxes and all those cases are people who recently moved into the subdivision and one, in the middle of bank foreclosure litigation, was recently on the Board), and therefore the Board is probably not doing anything about it due to fear of losing those peoples' support/it is their clique, and some of the current Board members might well be some of the 6 not paying now.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Roger

Do you have any proof of your accusation?

BillD16 (Texas)
Posts: 971

Posted:

Quote:

Posted By RogerJ1 on 10/05/2023 5:15 PM
A small POA that has only had a few incidents of late payments of annual assessment in its 40 year history, has 6 lots, of 56 lots, not paying this year. At a recent meeting 10-4-23, the Board stated it is not charging interest (even though the Restrictions appear to state that interest must be charged for any late payments) nor has the Board filed any liens nor turned over the the delinquency to the Association attorney. The payments were due January 1 per the Restrictions, but the Board was around a month late sending bills, so I am not sure what the exact due date for 2023 is since they did not send bills until after January 1st this year - note all other Boards sent bills out in early December of each year for the next January 1st due date.

What are the ramifications for not charging interest nor filing liens for non assessment bills that are approaching a year old?

My neighborhood went through a 'transition' to a new PMC last year (and we're still reeling from it).

In short, we noticed that we had a significant number of delinquencies and decided to offer "amnesty": all late fees forgiven if you paid up by {date}. It was moderately successful.

I'm going to guess that your Board is 'bashful' about the interest fees because they screwed up and were late getting the bills out this year. I don't know your neighborhood or the amounts involved, but I wonder if they're blowing off the interest in hopes of simply collecting the dues?

Or did something change such that these 6 lots decided "we're not paying our dues! Nyah!"?

I get the sense that you're cheesed off at the Board over this, and maybe I should share in your cheesed off-edness. But - keeping in mind my lack of knowledge about your situation - I'd likely forgive the Board if they're actively working to get the dues paid.

Bill

HOA Board ex-President
Austin, Texas USA

“You can’t put too much water in a nuclear reactor”

RogerJ1 (Texas)
Posts: 550

Posted:

Quote:

Posted By JohnC46 on 10/08/2023 10:48 AM
Roger

Do you have any proof of your accusation?

Yes. Property tax records, land records and court proceedings are all public, easily searchable information.

KellyM3 (North Carolina)
Posts: 2,239

Posted:

Hi Roger,

Any ramifications will certainly be felt from the non-payment of dues by those accountholders. If on your HOA board, I wouldn't worry too much about interest charges but I'd worry about not following state collections laws in order to get the core money you're contractually owed in the form of monthly dues.

Owners are testing the mettle of your Board of Directors and the board's slow stepping is encouraging non-payment, in my opinion.