Late dues - Lein or sue owner in small claims?

Started by SteveM9 • 8 replies • 3136 views

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SteveM9 (Massachusetts)
Posts: 3,699

Posted:

From what I have read, the route of placing a lien on a condo, eventually leading to a foreclosure is long and a lot of hard work. Seems like even with a lien, its hard to actually get the money depending on the bank, etc..

Quote:

If the HOA has not recorded a lien, then the HOA still has an unsecured debt which they can attempt to collect against the prior owner.

So it seems better to go after the actual home owner in small claims court instead of a lien. This way if the owner walks away, gets foreclosed, etc. He will still owe the condo association, provided he doesn't declare personal bankruptcy. Right now I see many people walking away from their homes, but not declaring bankruptcy. They have money, but have a housing problem.

Quote:

The court can also order the debtor to make payments on the debt. If the debtor doesn't live up to his payment arrangements, you can then start trying to collect the judgment by garnishing wages or bank accounts, or trying to locate his personal property.

Wouldn't it be better to go after the actual home owner in small claims court instead of a lien?

MicheleD (Kentucky)
Posts: 4,491

Posted:

SteveM:

Depending on your state's laws, you can do both.

We do both.

We get a judgment in small claims against the homeowner (though keep in mind, getting a "judgment" and getting the $$$ are two very different things), and we file a lien against the property.

We have never and probably would never actually go to the "foreclosure" step -- historically we haven't had a reason to. The lien is paid off when and if the homeowner sells. The only time we miss out is when the lien is extinguished during a bank foreclosure. That's when having a judgment, as well, can help. We can then proceed to enforce the judgment, by whatever methods needed, garnishment, etc.

We've never actually gotten to that step, either though.

So, if your state's laws allow, and the amount owed justifies it, do both.

DonN (Michigan)
Posts: 357

Posted:

My research indicates that whether or not unpaid dues and assessments can be pursued in small claims court depends upon whether or not the CC&Rs state that unpaid dues and assessments are a personal debt of the owner. Usually, a lien may be filed against the property for unpaid dues and assessments.

The remedy for nonpayment of the lien is foreclosure.

It is logical that the authority to pursue collection in small claims court must be defined in the CC&Rs. Owners deserve the protection against abuse.

To access much more information, I suggest a Google search with the search string:

"owners association" dues assessment "personal debt"

The requirement that the CC&Rs must define unpaid dues as a personal debt may be analogous to the mortgage and promissory note documents. The mortgage places the property as security and the promissory note creates a personal debt.

I believe it would be improper for the Association to file in small claims court unless it has unquestionable authority to do so. Without unquestionable authority, the action in small claims court is a form of legal bullying. Many people would be frightened by receiving a summons and complaint.

Don Nordeen
Governance of Property Owners Associations

PeterB1 (Florida)
Posts: 257

Posted:

DonN

You said: "Many people would be frightened by receiving a summons and complaint."

Perhaps they would be frightened enough to voluntarily pay their assessments! Right now, we have people thumbing their nose at our requests for payment. Even a lien does not force payment. Fear is good.

MicheleD (Kentucky)
Posts: 4,491

Posted:

Quote:

Posted By DonN on 04/08/2009 8:41 AM

I believe it would be improper for the Association to file in small claims court unless it has unquestionable authority to do so. Without unquestionable authority, the action in small claims court is a form of legal bullying. Many people would be frightened by receiving a summons and complaint.

In most states, and in MOST CC&Rs, small claims is absolutely allowable as either a primary route for delinquent assets or an additional route, along with a lien.

Holy cow, how can there be "abuse"?!

Good grief, don't you think a judge could determine, once the case is heard, whether there is "abuse" or not in an attempt to collect a legal debt?

And BOO HOO if receiving a summons or complaint "frightens" some people!

They should have thought of that LONG before it got to this stage.

By my calculations, someone in our HOA, for example, would have received 4 notices from us and at least 3 notices from an attorney before the notice of lien is filed.

They also receive notification in the notice of lien that attempts to collect will also be pursued through small claims court.

If after all that they get all scared by receiving a summons, well, too bad, so sad.

DonN (Michigan)
Posts: 357

Posted:

Reply to PeterB1

My view is that fear is okay if created on a basis that is valid under the law and governing documents. Without that validity, the legal action is an abuse of power, IMHO. There are many posts on HOA Talk expressing concern about abuse of power in owners associations. Abuse in collecting unpaid dues is still an abuse. Two wrongs won't make it right.

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Reply to MicheleD

A case which opines that covenants which "run with the land" are "not personal" is Candlewood Lake Assn., Inc. v. Scott, 2001-Ohio-8873 — Separately search for "not personal" and "with the land". The entire paragraph describes the covenants in question. The important quotation is:

"Similarly, the covenants at issue, as the covenants in Peto, are covenants that run with the land, not personal covenants. First, the deed restrictions affirmatively state a clear intention that "[t]he Restrictions shall run with the land and shall be binding upon the Association and upon all parties ('Owners') having or acquiring any right, title or interest in the real property or any part thereof." (Paragraph 203 of deed restrictions; emphasis added.) See, also, paragraph 905 ("The foregoing covenants and restrictions shall run with the land and shall be binding on all parties and all persons claiming under them ***"). Similar language in a "Membership Covenant" in the by-laws of a resort property association has been held to constitute a covenant running with the land. See Rome Rock Assoc., Inc. v. Warsing (Dec. 23, 1999), Ashtabula App. No. 98-A-0051, unreported ("This covenant concerning said real estate and the enjoyment, use and benefit thereof shall be deemed to run with the land and non-payment of the annual charges shall be a lien thereon")." [Bold and underline emphasis added]

Obviously, the Ohio court reviewed the specific language in the covenants and concluded that the covenants in question are not personal. If the covenants are not personal, it is logical to conclude that unpaid dues are not persona.

Other CC&Rs specifically state that unpaid dues are also a personal debt, and as such should be collectible in small claims court.

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Please be advised that the writer is not an attorney, and this is not legal advice. The information is based on research on information available in the public domain.
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Don Nordeen
Governance of Property Owners Associations

MicheleD (Kentucky)
Posts: 4,491

Posted:

Quote:

Posted By DonN on 04/08/2009 3:09 PM

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Please be advised that the writer is not an attorney, and this is not legal advice. The information is based on research on information available in the public domain.
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This is good to know, that you are not an attorney nor do you provide legal advice. Especially since your one "example" is hardly supportive that one CAN'T go to small claims to recover the assessment delinquency.

GinaA (Florida)
Posts: 9

Posted:

I have to add that depending on what state you are in vs. the amount of money that is owed, that is where you may want to make your decisions. Not all States are the same. Do your research. For example, you have a HO who owes $400. The cost of filing a small claims case is roughly $175.00 then you have the cost of a process server, say $25.00. So now your paying $200.00 to possibly get a judgment of $400.00. You may or may not, again depending on the court, be allowed to tag on the costs of the filing fees. So are you willing to spend $200 to get a $400 judgement? Any what if you can't collect? How long is the Judgment going to sit? With the amount of foreclosures occurring, you have no guarantees these days.

MicheleD (Kentucky)
Posts: 4,491

Posted:

Gina, that is true. . . somewhat.

Here in Kentucky we "bundle" small claims filings. Chances are there is more than one person delinquent, so it is more cost-effective to file as a group/bundle.

But yes, it is said here repeatedly, check with your own governing documents AND state and local statutes, ordinances and laws.

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