Publishing Names of Deliquent Owners vs. Unit Numbers

Do you know if the HOA is allowed to mail owners lists of names of people who are delinquent? From what I can garner, it's legal but it's a gray area. I heard that publishing deliquent unit numbers rather than names could be better.

And that the lists can only go to homeowners, not renters and shoudl not be posted anywhere, only mailed.

Anybody know about this?

We have $160,000 in delinquencies. Over half our complex is not paying. Thanks.

General advice around the board is that while it is likely LEGAL for the HOA to do so, it isn't thought by many to be the wisest thing to do. It is also believed that other methods of collection will garner you better results than shame.

Thanks. Davis-Sterling is actually where I got my info : )

". . . there is no guarantee a disgruntled owner won't claim defamation. "

Claiming it and winning a suit over it are two different things. And someone who is delinquent may not have much cash to get a lawyer and sue.

We mail out a status report to ALL MEMBERS of the ORGANIZATION. It is their organization, it is their information.

This isn't "publishing" - it's a status report of as XXXX date that is sent to each member of the association. We aren't Citibank, we are all members of the organization, and we aren't publishing in a newspaper or online.

The names and addresses are listed along with status: Paid or Unpaid.

Here's an interesting article from the Berding-Weil website which also has a lot of good information.

The economic crisis has impaired the ability of homeowner associations to pay for maintenance, insurance and to properly fund repairs and capital improvements. It is said that “Necessity is the mother of invention” and in other articles and presentations, we have identified smart, prudent ways of minimizing the effect the crisis has had on association operations, including, most recently, the efficient use of small claims court to pursue delinquency claims against owners whose homes have no equity. One idea we do not endorse is the publication the names of association members in a newsletter or other written media distributed by an association or its managing agent. Here are some reasons why publication is unwise.

The Davis-Stirling Act Does Not Authorize Publication

Assessment collection is highly regulated under Davis-Stirling and the Fair Debt Collection Practices Act. Many of the laws are intended to protect the debtor. None of these laws specifically authorize the publication of the names of delinquent owners; in one situation publication is specifically prohibited and in others it is implied.

The decision to foreclose on a delinquent owner's property must be made by the board in executive session (Civ Code §1367.4). The board is required to maintain “the confidentiality” of the owner by referencing the property by parcel “rather than the name of the owner”. The decision to record a lien must be done in open session but the statute does not require that the owner's names be identified (§1367.1(c)(2)). However, before the lien is recorded, the association must meet with an owner “in executive session” to discuss payment plans if they are timely requested and available. Further, at various points in the foreclosure process, the owner has the right to request mediation or arbitration, proceedings which are generally confidential and must be confidential if requested by the owner in the context of a disciplinary hearing. All this confidentiality implies that an owner's financial status is sensitive and private.

The Fair Debt Collection Practices Act

The FDCPA is a federal law that regulates the collection of debts which can include assessments. The law does not generally apply to restrict how creditors (like an association) collect their own debts but does impose restrictions on third party collections. In a particular case, this may or may not include an association's lawyer or manager. It is very likely that the publication of a list of delinquent owners would be contrary to the privacy protections contained in the FDCPA.

Right to Privacy

“Defamation” is basically oral (“Slander”) or written (“Libel) statements that are intended to injure someone's reputation. We've all heard the phrase “truth is a defense” to defamation claims but this is inaccurate when it comes to the publication of “private facts”. The first California case to acknowledge a right of privacy, decided in 1931, upheld a claim based on the publication of private facts. The California constitution now gives our citizens a right to privacy. The main question is whether the facts are private and not of legitimate public concern and if publication to a specific group for a specific purpose would be privileged under §47(c). In one homeowner association case, the court recognized the members have an expectation of privacy when it comes to the casting of ballots (Chantiles v. Lake Forest II Master Homeowners Association (1995) 37 Cal.App.4th 914); it is easy to imagine a court would extend this rationale to financial relations between an owner and their association and that breach of the privacy expectation would support claims against the association and others who participated in the publication.

Fiduciary Duty

Directors should act in good faith in ways intended to benefit the community. A board must weigh the pros and cons and risks and benefits of a particular action before authorizing it. Is it really likely that those owning homes whose debt exceeds value are likely to be shamed into paying association assessments by putting their names in the newsletter? Will publishing the names of owners who have vacated their homes motivate them to pay a debt? If they have left no forwarding address and thus are not likely to receive the newsletter, what possibly motivating criteria could justify publication? Is there a risk of wrongly publishing the names of owners who are current or who have cured the delinquency? Does publication for a family already desperate create a risk of litigation (which might not be covered under a “D&O policy)? Is the community benefited by knowing who is delinquent versus the amount of the collective receivables and steps the board is taking to address cash flow problems? Does publication breed support for positive approaches to the economic crisis?

The answer to these questions is “no”. There are allot of reasons why an association should not publish the names of delinquent owners. Doing so is probably contrary to statutes and the state constitutional right to privacy, doing so subjects the association, directors and managers to risks of claims; can create anger and division in the community; and isn't really likely to work. As we've written before and addressed at our recent seminar, there are many positive things an association can do to overcome the current economic crisis; things that can reduce receivables and expenses and garner respect for the board and the association. As to publication of debtor's names, as Nancy Reagan famously said in another context: “Just say no”.

Reese, not for nothing but I think if I had half my association not paying their fees and I was $160,000 short the last thing I'd be asking would be if I can list their names!

Are you sure you don't want to ask any other questions? Like, "How do I get my members, new and old to pay their fees?" or "Does anyone know attorney that goes by the nick name of "Pit Bull"?

Good luck Reese. Wow, am I glad I don't live in California. I have one unit in arrears and they're at the attorney.

Dana

Unfortunately, when it comes to debt collection, it doesn't matter if you publish names, file liens, or go to court in order to collect. There will be backlash no matter what method you use. Some will pay up, others will dig in their heels and be as obstinate as possible.

However, I agree with the others. Publishing names or even just unit numbers of the deadbeats really won't get you anywhere. We just follow our normal procedure: demand letter when 60 days past due, file in small claims at 90 days. We probably only have to actually go to court for about 1%.

And no pool privileges for anyone with a balance due unless payment arrangements have been made. At the start of pool registration we had about 5% outstanding for this year. Several of those paid up yesterday when they saw the pool open.

Reese,

IF, as you say, many of the delinquent members are new owners, perhaps the board needs to educate these people. Although everyone should receive the gov docs, at least at closing, many new member neglect to read them. These new members may not be aware of the consequences of not paying their assessments (such as foreclosure). In fact, I think it's a good idea to inform the whole membership from time to time what the exact consequences are if assessments are not paid on time. Make certain everyone has a copy of the board-adopted collection policy (I sure hope your board has one!) and understands exactly what each step to be take means.

Is there any state where you cannot go to small claims to collect delinquent assessments, as long as the amount owed is not higher than the limit for small claims??? The thing is that even if a judgment is ordered against the h/o, it still has to be paid! The h/o can choose to just ignore the judgment, right?

Dwight,

You can get a judgment if the lien isn't paid! Then if the prop owner still doesn't pay up you can get a default judgment. After that it's either garnishment of wages of go for foreclosure.

Hi Dana-- I did ask on a separate thread about collecting on liens.

I am trying to address large and small ways to help get people to pay up.

I gotcha Reese. I'll look for it. It just seemed like you had bigger fish to fry then posting the delinquent names. ;-)