Approaching Tenants?

Started by TracieS • 19 replies • 1724 views

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TracieS (Colorado)
Posts: 460

Posted:

All,

I'm so appreciative of all the responses I've had, and now I have another question! I'm really looking for all replies here, from "go for it" to "you're crazy" along with any suggested wording.

Backgroung - Small, 19-unit townhome association in Colorado. 2 owners delinquent on dues. I'm PM and BOD and Pres (please, no lashing for this here, I already know it's quite an issue and a serious conflict of interest). I own one of the units.

Some may want to search for my post - Squatters.

So, I have made a payment plan for one delinquent owner who lives in his unit. We're going to bring him completely current by July 1, 2010. Yes, it's a long time, but he owes more than a year's worth of dues, I'm a softie, I don't want to kick anyone out of their house (especially now), and some income is better than no income. I'm going to write up his agreement to the payment plan and mail it certified/registered mail. Then, if he's not current, I'll start foreclosure proceedings, possibly foreclosure with receivership.

Now, the one that I need advice on... The other delinquent owner is more than a year behind on dues. The owner does not live in the unit, and in fact, the listed owner is in the final stages of Alzheimers, and will never return to the property (or Colorado) again. The "tenants" are the owner's family (family feud involved here), but do not speak to the owner, or to the owner's caretaker. The owner's caretaker (owner's daughter), has indicated to me that the association can begin foreclosure proceedings because she's had enough of "them" (tenants-family).

I still need to complete part of the debt collection policy, so I'm not to the stage of foreclosure on that unit yet (30 day notice, 60 day notice, etc).

Should I discuss any of this with the tenants? There is one tenant I have a good relationship with (owner's grandson). If the association forecloses, they're going to lose their house (which may be a good thing...refer to the Squatters post). But, I'm still a softie, and I don't want anyone to lose their house (the adults in the house, I couldn't care less, but there are a few small children involved, and I feel badly for those kids).

So...discuss with the tenant? Don't discuss with the tenant? What's the worst that could happen? If I were them, I would want to know, so I could either maybe start paying the dues on my grandma's house, or I would begin to look for someplace else to live... But, these tenants are not the classiest of people, and I could see this turning out kind of poorly, but... If I do discuss it with them, how should I present it?

I just want the association to get its badly needed $$$$. Am I crazy here? Could this be what finally breaks my camel's back?

What say you, oh knowledgeable and blunt, posters of HOATALK???

MaryA1 (Arizona)
Posts: 7,043

Posted:

Tracie,

I wouldn't say anything until the papers are recorded thus becoming public knowledge. After that, I can't see where any harm could be done in advising the tenants that foreclosure proceeding have begun on the home and at some point they may be required to vacate the premises. You might suggest they contact the owner. I know this might not make you happy, but the tenants may wish to purchase the home.

JohnO6 (Georgia)
Posts: 424

Posted:

Tracie - I'm sure you'll end up getting a fair amount of "spirited" responses to your post

The purpose of my response is rather narrow, and it is to advise you to proceed with caution regarding talking to the tenants. Since you occupy multiple roles (Owner, Board Pres, PM) it's a reasonable assumption that in your attempt to collect delinquent dues from the owner, you are in the role of a "debt collector".

In that role, if you even make anyone who is not a party to the debt (e.g. the tenants, despite their family relationship they are apparently not a party to the actual debt) even aware of the delinquency and subsequent attempts to collect the funds, you could be in violation of the Federal Fair Debt Collection Practices Act.

Don't think you want to be violating any federal laws here do you?

TracieS (Colorado)
Posts: 460

Posted:

I appreciate that. I am setting aside how I feel about these people as a neighbor, and I'm trying to do what's best for the association (the asset I've been elected to protect, and the job that I've been hired/contracted to do).

Besides, maybe they'd take better care of the property if they were owners. My husband has been loaning them tools and we wave and say hi, so maybe we'll win them over... My eternal optimism...it might just kill me someday!

TracieS (Colorado)
Posts: 460

Posted:

John, I'm hoping for "spirited" response. I am conflicted about how to proceed, especially since I do occupy multiple roles, and yes, I'm the official debt collector.

I have also been reading up about the Fair Debt Collection...and I was hoping to get some response to that as well. I guess I'm kind of a "third-party" debt collecter, or I could be seen to be that. The BOD role, not a third-party. The PM role, perhaps a third-party.

Me, violate federal law??? I do already have an FBI file going, so maybe I'll just try and see what I can get away with!

That's a JOKE!

JohnO6 (Georgia)
Posts: 424

Posted:

Tracie - I'm not an attorney, so my knowledge regarding the Fair Debt Collection Practices Act is from personal experience in our HOA (I was President at the time).

We successfully amended our CCRs to restrict rentals. Part of that process required owners who desired to rent to complete a "Leasing Application Request" and also sign a separate contract with the HOA. That contract stipulated that in the event the owner became delinquent on HOA dues, the HOA could collect the dues from the tenant and that amount collected was not due to the owner from the tenant as rent.

Well, we had one case where we needed to go after the tenant for the owner's delinquent dues. While the notification letter to the owner could go out under either the HOA attorney's signature or the PM company's signature, that was not the case for the letter to the tenant. Our attorney (specializes in Community Associaton practice) advised us that both the PM and the Attorneys were considered "debt collectors" but that the tenant letter had to go out from the BOD of the HOA. Since the HOA employed both PM and Attorney, the BOD itself was not considered a "debt collector" in this instance.

That personal example is the genesis of my words of advice to you.

MaryA1 (Arizona)
Posts: 7,043

Posted:

John,

I'm curious to know if the requirement to collect the HOA assessments from the tenant was discussed with your attorney. I'm not an attorney but this procedure seems to have no legal standing. The HOA is only entitled to collect assessments from members, they have no legal right to collect any monies from a tenant. I would be interested to know how your attorney justified this practice.

JohnO6 (Georgia)
Posts: 424

Posted:

Mary - Yes, in fact it was the attorney who suggested this. You are quite correct that the HOA only has legal standing with the owners, however in this case in exchange for the granting of a Leasing Permit (now required by the CCRs), the owner must CONTRACTUALLY agree with the HOA to subrogate rent payments to pay any HOA assessments due and payable.

Frankly, this served to "tie this up in a neat little package" as far as the HOA was concerned - we now have recourse against absentee owners that is much more immediate and effective than the traditional collection/lien/foreclosure process.

TracieS (Colorado)
Posts: 460

Posted:

John,

We don't require owners to notify the HOA re: leasing. The HOA only requires that the owner provide the tenant with a copy of the CC&R to follow. I never know who lives in those rentals.

Could you possibly post a copy of your "leasing agreement"? How did you institute this? Yes, we would need to amend, so it's not something we can do right away... You hand out permits? Really? Are you single family detached homes, or are you condo? Mostly owner-occupied or mostly rental?

Thanks!

MaryA1 (Arizona)
Posts: 7,043

Posted:

John,

I understand a contract is issued but it's between the HOA and the OWNER, not the tenant. Unless the owner has put that clause in the tenant's contract to lease, IMO, the tenant is not obligated to pay the assessments. Therefore, if the owner becomes delinquent he is obligated to instruct the renter to pay the assessments. If the renter does not, IMO, the assn would then have a claim against the owner not the tenant.

JohnO6 (Georgia)
Posts: 424

Posted:

Tracie - This was part of a CCR amendment that limited the number/percent of our homes that could be rented. We are a 103 unit community of fee simple attached villas. Majority owner occupied. We limited leasing to no more than 5% of the units with a "grandfathering clause" for units already leased as well as a "hardship clause" for extraordinary circumstances (circumstances were defined, but worded as "not limited to" therefore giving the BOD directors substantive authority in the decision process). I would prefer not to post the actual CCR amendment but would email it upon request.

I'm likely to be off this board for the next few days as the holiday weekend approaches, but will check back in late Monday.

KirkW1 (Texas)
Posts: 1,665

Posted:

Our management company also takes the same view as John's in that the HOA itself (and the Board) is not subject to Federal Debt Collection laws. I have seen a link on this site to an attorney who also held the same view.

But here is where I would stand on the issue:
Unless you have clear reason to believe that the owner (or the owner's custodian) has authorized it, wait to speak to the tenants until after things have been files at the courthouse.

Now as I recall you have spoken with the daughter taking care of the owner. I would simply ask her for permission to speak to the current residents.

When approaching them I would simply indicate that the "estate" is behind and will be foreclosed on if something isn't done. I would simply say that someone would need to setup a payment plan. I would be careful to not suggest just who should pay the money. Rather I would keep it as a friendly discussion of the hard truth. And let them know you are only sharing this so they don't get caught off guard.

MaryA1 (Arizona)
Posts: 7,043

Posted:

Kirk,

Why would you suggest that Tracie put herself in the middle of this? If she is going to speak to the daughter who is the custodian of the estate, she could ask her if she has spoken to the tenants but I certainly wouldn't suggest that Tracie ask if *she* can speak to them. Everything you suggest that Tracie ask the tenants should be posed to the custodian. This is a matter between the prop. owner and the BOD; the tenant has no involvement in this at all.

KirkW1 (Texas)
Posts: 1,665

Posted:

I don't believe that Tracie has any obligation to do any of this. But she has expressed interest in trying to get the money which is probably the best thing for the HOA.

The simple fact is that financially getting the money is almost always the best situation. Foreclosure is the easy thing to do. Especially if you hire someone else to take care of all the details.

Given that Tracie's posts on previous threads where she spoke to the custodial daughter and her desire to simply get the money for the HOA, it would make sense to ask permission to speak directly to the tenants. Then she can simply lay the facts down that if someone pays the HOA all will be fine. Otherwise the house will be foreclosed upon. No, the people staying there don't have an obligation. But they may realize that cheap rent is the next best thing to free rent. I would jump at the chance to live where the home was paid for and all I had to pay for was upkeep, taxes, HOA, etc.

MaryA1 (Arizona)
Posts: 7,043

Posted:

Kirk,

I just don't understand why Tracie would ask the caretaker if she could speak to the tenants when she can just speak to the caretaker and lay it all out to her. But if she did give permission to Tracie to speak to the tenants, IMO, Tracie doesn't have any authority to work out a payment plan for the delinquent assessments. That's something that should be negotiated between the caretaker and the tenants -- pay the assessments instead of paying rent. Frankly, I don't think this is something Tracie should get involved in -- it's really none of her business. Of course, that's just my opinion.

BTW, I seem to recall these tenants are living there rent free, so why would they want to pay the delinquent HOA fees?

TracieS (Colorado)
Posts: 460

Posted:

I appreciate the comments.

The owner and the tenants do NOT speak - at all. I was just hoping to get some money for the association. Over the weekend, I had a change of heart on the issue.

I will NOT be approaching the tenants, at all (except as a neighbor, Hi, how are you, etc). All paperwork will go to the address on file for the owner. Unfortunately, I will be operating within the legal framework set up for this situation. I would rather just collect the money without having to start claim/foreclosure proceedings... I would rather not foreclose on a little old lady with dementia due to her horrific family. I would rather not foreclose on squatters who have young children.

Sometimes, what "I would rather" do, is not in the best interest of the association or myself as a legal representative.

I'm learning!

MaryA1 (Arizona)
Posts: 7,043

Posted:

Trace,

IMO, a very wise decision! I'm sure you will come up with the right decision and do what is in the best interests of the assn. As a board member (and in your case, also the PM) you must always be objective in your decisions. You can't let emotions get in the way of your decisions. Yes, you *are* learning, Tracie. Keep up the good work!

GlenL (Ohio)
Posts: 5,491

Posted:

Traci when you do your rental policy here are some things I would suggest but I would suggest you have an attorney draft it to make sure it complies with Colorado HOA and landlord tenant law. Number two would help in your situation.

1. Make the minimum rental term at least 6 months preferably a year.

2. Add something to the effect of if the homeowner becomes delinquent with their assessments then the Association can collect them and any past due amounts directly from the tenant and the owner must credit the money paid by the tenant as rent. In other words if your monthly assessment is $150.00 and the H/O is delinquent then the BOD collects the $150.00 from the tenant directly. When the tenant sends the owner his rent minus the $150.00 the owner must credit it as if the tenant paid him in full.

3. I would also include language that if you have amenities (pool, tennis court etc.) the owner either assigns the amenity to the tenant and cannot use it for the term of the rental or keeps it for their self and the tenant can't use it.

4. Give the Association the power to initiate eviction actions against problem tenants with the cost to be born by the homeowner.

Studies show that 5 out of 4 people have problems with fractions

JohnO6 (Georgia)
Posts: 424

Posted:

Quote:

Posted By MaryA1 on 07/02/2009 8:47 AM
John,

I understand a contract is issued but it's between the HOA and the OWNER, not the tenant. Unless the owner has put that clause in the tenant's contract to lease, IMO, the tenant is not obligated to pay the assessments. Therefore, if the owner becomes delinquent he is obligated to instruct the renter to pay the assessments. If the renter does not, IMO, the assn would then have a claim against the owner not the tenant.

Hi Mary -

Sorry, I've been a little incomplete in some of my answers/descriptions - but we've really got this tied up pretty tight:

1). This leasing restriction, as well as the subrogation of rental monies in the event of owner delinquencies are actually part of a CCR amendment - so as you well now, this now legally encumbers the property to these provisions.
2). The CCRs require that the owner submit an application for a "Leasing Permit" (without such a permit, the owner is in violation of the CCRs). So the owner is both contractually bound by the application and issuance of the permit, but also the property is bound by the CCRs.
3). Perhaps my biggest omission, is that the CCRs require language any lease for which a leasing permit will be issued to contain the precise language regarding the HOA's rights to collect delinquent owner HOA dues directly from the rent of the tenant. In this way, the tenant is also contractually bound to the HOA in the event it's necessary.
4). BTW, there is also language in the required lease regarding the tenants' agreement receipt of and agreement to follow all CCRs, rules and regulations of the HOA and BOTH parties (owner and tenant) agree that they are fully liable to the HOA (including fines, sanctions, etc)in the event of such violations. Finally, there is language in the required lease that stipulates that violation of HOA CCRs, Rules, Regulations constitutes a default of the lease which may then be terminated by either the owner OR the HOA.

Since both the tenant and owners sign the lease that contains the required language, I think you'd agree we've got our arms pretty well wrapped around this issue.

MaryA1 (Arizona)
Posts: 7,043

Posted:

John,

Thx for the explanation! My concern was that the tenant be informed of the prop owners agreement with the HOA which is why I stated I thought the stipulation should be put into his contract with the prop owner. I see you've covered that base by requiring the tenant to also sign the contract.

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