Alternative to Liens for Fees

Started by WhitneyF • 3 replies • 1489 views

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WhitneyF (Kansas)
Posts: 2

Posted:

Our board is looking for other means of getting deliquent townhome owners to pay their monthly assessments. We do issue late notice letters that include a $5/day fee for late payments. Our association manager has also put liens on some of the larger balances. However, when the home goes into foreclosure and is auctioned off, we rarely see any return of funds. And the late fees and/or violation fees (for issues other than deliquent assessments) are ignored.

Do any of your HOAs have other methods for collecting back assessments or reprimanding violators? One of our members did suggest installing a gate and deactivating gate keys for deliquent home owners (which I believe happened in NY).

SheliaH (Indiana)
Posts: 6,964

Posted:

If you don't already have a gate, I would think you'd run into trouble if you installed one, handed out keys and then deactivate the ones assigned to the deadbeats. You would probably have to write something in your bylaws or CCRs that allowed you to do that, meaning you'd need homeowner approval before any of this gets done, and that may take a while.

I have heard of some HOAs filing liens against the homeowner for major CCR violations (e.g. putting up a fence on common areas). If the house is sold, the lien has to be resolved before the title changes hands. Otherwise, you may have no choice but to file a lawsuit against the homeowner for an injunction to compel him/her to comply with the CCRs. To make sure you don't use an elephant gun to kill a mosquito (so to speak), you should discuss various options with your attorney - better to sue for major things that can be easily proven.

As for delinquent fees, we've also run into the same problem with filing liens. The problem is the mortgage company's secured interest in the house trumps everyone else's lien (except those involving taxes). If the house is sold, they get their money first and if there wasn't enough to cover them and the HOA's lien, the HOA loses out.

Liens don't necessarily guarantee anything, which is why our HOA (we're also a townhouse community) files them early as well as a lawsuit against the owner. With a judgement, you can pursue payment with things like garnishing wages and the lawsuit would stay on the owner's credit report for at least 7 years - that could prevent him/her from getting new lines of credit (after all, if the Association can't get paid, why should this homeowner receive new credit to purchases cars, TVs, a vacation, etc.?)

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

JohnO6 (Georgia)
Posts: 424

Posted:

One alternative you could try is the use of a collection agency.

In addition to the "traditional" percentage based agencies, there are now a number of fixed fee alternatives available online. For a pretty reasonable cost, they will send either a single or a series of collection letters from their agency. One feature that I think would be particularly valuable and is also available from these vendors is reporting the delinquency to all three major credit reporting bureaus. That will impact the debtors ability to gain credit in the future. It's certainly something I wouldn't want to face!

One such agency is at www.olddebts.com

I have no affiliation, but have done some background research on this subject for our HOA. We have not yet used such a service, but we are fortunate to have a very low delinquency rate in our community.

WhitneyF (Kansas)
Posts: 2

Posted:

Thanks for the advice! We are planning to look into the debt collectors you recommended.

One of our board members was reviewing the closing documents from her purchase and noticed a clause on the condo/planned development rider that stipulates if any assessments are missed, the bank can be notified and the assessments can be added to the mortgage payments with interest. We plan to investigate this avenue.

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