Collecting HOA Dues

Can a homeowner be taken to small claims court by the HOA in order to collect past due HOA Assessments? Thanks, from FL.

Linda C3

In Florida after requests from the Board for payment of assessments, the HOA Board of Directors can turn the collection over to an attorney who will do the following:

1. Send a demand letter with a ten day requirement for the delinquent home owner to pay all outstanding assessments and all legal fees and expenses.

2. After that time has expired, the attorney can file a lean in court against the property of the home owner.

3. After approximately 90 days the attorney can file a foreclosure on the property for all assessments and legal fees and expenses.

4. If by this time the home owners fails to pay everything, after about another 90 days, the HOA can "buy" the home in foreclosure even if the home has a mortgage and is under water (more owed than the house would sell for).

5. Then the HOA can evict the home owner and rent out the home to recover all of the costs involved.

6. If the home is worth more than the mortgage or has no mortgage the HOA can sell the house and keep the proceeds entirely.

This might sound harsh to you but under Florida Law your Board is required to protect the financial interests of all of the members of the HOA. If the Board fails to pursue the unpaid assessments they are liable under Florida law for failing to uphold their fiduciary responsibilities.

The way foreclosures work the HOA would be lucky to be reimbursed for any money at all. That is because the bank gets paid FIRST before the HOA or any other debtor. A HOA foreclosure basically does the work for the bank if the property isn't in danger of foreclosure from the bank. That is why HOA foreclosure should ONLY be done under the right circumstances and scenerios. It is NOT a money making process but a stop the bleeding effort.

The HOA doesn't want to own the property either. It's a whole other expensive issue. The best the HOA can hope for is for the property to be sold to a third party when it comes up for auction.

I cannot tell you whether or not you can under Florida law. The question you should ask is whether it is a good idea.

Lawsuits are not cheap, especially if you have to hire a lawyer. You will pay hard cold cash for the attorney, you will pay to file the complaint in court, and you will pay to serve process on the owner. If the owner does not reside in your subdivision, you may encounter added costs trying to locate him. In my state a person cannot procede with a lawsuit for money if cannot serve the defendant personally. If the owner disputes his liability, you can expect to pay a ton of costs for discovery.

Suppose all goes well, the defendant owner is served, and the HOA has a judgment. Fine, but a judgment is not money, it's just a legal authorization to try to collect the money. The owner did not respond to the demands for payment before the lawsuit. What makes you think he is now going to pay the amount plus all your expenses?

My POA went on a holy war against non-payers, who represented about 4 percent of our membership. The board hired an attorney who took us for quite a ride. For two years the attorney persued the non-payers in court. We paid the attorney roughly 50 percent of our income each year for those two years and recovered next to nothing. To put this another way, we spent 50% of our annual income to try collect 4% and recovered less than 1%.

My advice to any HOA is do not bother to file a lawsuit unless you know for sure that the defendant can and will pay a judgment. Of course, if this was the case you would not need to file suit against him.

Most collection efforts are going to require that you divert substantial cash assets from their intended use to persue a non-paying owner. This means that the lawns do not get mowed or the streets do not get paved or the pool goes unrepaired because you are chasing after a small amount of money that you are unlikely to ever collect.

I would check your state statutes on this...Kansas passed a law last year that allows folks to retain certain voting rights even if they are delinquent. I would agree that you need to do everything you possibly can for free before heading to court. Small claims shouldn't be too bad if your state allows an officer to file and you don't have to have an attorney.

FL720.305...

(3) If a member is more than 90 days delinquent in paying a monetary obligation due to the association, the association may suspend the rights of the member, or the member’s tenant, guest, or invitee, to use common areas and facilities until the monetary obligation is paid in full. This subsection does not apply to that portion of common areas used to provide access or utility services to the parcel. Suspension does not impair the right of an owner or tenant of a parcel to have vehicular and pedestrian ingress to and egress from the parcel, including, but not limited to, the right to park. The notice and hearing requirements under subsection (2) do not apply to a suspension imposed under this subsection.

(4) An association may suspend the voting rights of a parcel or member for the nonpayment of any monetary obligation due to the association that is more than 90 days delinquent. A voting interest or consent right allocated to a parcel or member which has been suspended by the association may not be counted towards the total number of voting interests for any purpose, including, but not limited to, the number of voting interests necessary to constitute a quorum, the number of voting interests required to conduct an election, or the number of voting interests required to approve an action under this chapter or pursuant to the governing documents. The notice and hearing requirements under subsection (2) do not apply to a suspension imposed under this subsection. The suspension ends upon full payment of all obligations currently due or overdue to the association.

(5) All suspensions imposed pursuant to subsection (3) or subsection (4) must be approved at a properly noticed board meeting. Upon approval, the association must notify the parcel owner and, if applicable, the parcel’s occupant, licensee, or invitee by mail or hand delivery.
History.—s. 37, ch. 92-49; s. 55, ch. 95-274; s. 2, ch. 97-311; s. 51, ch. 2000-258; s. 20, ch. 2004-345; s. 17, ch. 2004-353; s. 12, ch. 2007-173; s. 8, ch. 2008-202; s. 24, ch. 2010-174; s. 18, ch. 2011-196.

I disagree, although I certainly understand your point about the expense. However, paying assessments is a legal obligation of all homeowners and if you don't go after the ones who don't pay or refuse to, services won't be provided, as you pointed out, unless those who do pay kick in extra money to cover the shortfall. I don't know about you, but paying my own bills is challenging enough (especially in this economy) without having to worry about someone who has the same legal obligations as I do.

It's true a judgement doesn't guarantee payment, so what you have to do is consider the circumstances as to why the person isn't paying. Some don't pay because they don't like what the HOA board or management company (or both) are doing, others have serious financial hardships, such as job loss or major illness, and some are just deadbeats. The trick is finding out who you're dealing with and then talk with your attorney to see what the best course of action should be, because you don't want to throw good money after bad.

For the people with serious financial hardship, you may be able to negotiate a payment plan with them, based on their circumstances and past payment history. For the ones who can pay, but refuse to because they got a CCR violation letter or are upset that their next door neighbor (who they can't stand) got elected to the board, you have to sue them - there are other ways to handle those issues, but refusing to pay assessments isn't one of them. Ditto for the deadbeats.

If the house is in foreclosure, you may want to wait and see how that pans out because putting a lien on the house won't work (in most states like Indiana, the HOA lien gets washed out when the house is finally sold unless it was sold for enough money to pay off the mortgage company and everyone else). If the homeowner is in bankruptcy, the HOA should be named as a creditor - if they go chapter 13, the HOA will get its money, although it may take a few years.

Bottom line, the HOA has to be operated like a business and when you don't pay your gas bill, credit card bill, mortgage or car note, your creditors will take legal action against you if necessary - why should the HOA act any different?

HOA's certainly have varying degrees of collections aggressiveness.

One thing's for sure: Your state has a collections law or set of laws that defines a process for collection your delinquent dues. If you follow that legal statute, then you're following the law of the land - a process created by democratically elected voters in your state.

Now go out there and don't let your responsible dues payers subsidize the non-payers through lower quality services and amenities.