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KirkW1
(Texas)

Posts:1190

08/08/2008 5:56 PM
Well I checked my email this morning before going to work and boy howdy did it give me a headache. Our management company wanted permission to send an account to legal for a demand letter (at about $150 cost) to an owner. The heck of it all is that end of the day the only reason the owner owes money is very high collection fees being added to start with. While I realize that all other owners should not have to bear the cost of collection for the few that don't pay, I wonder if the management company doesn't have a profit center at the cost of our members. The cost of sending a statement aside from the initial bill is $10. And things start going up from there. Along the way we have our lawyer send a letter that costs $150. Then they do a property search before placing a lien. And by this time the cost to the owner is 4 to 8 times the amount originally owed. While I recognize that people need to pay what they owe, this seems: 1) Beyond what is reasonable. No other organization does this kind of thing. I have seen lower costs for properties being sold for back taxes. And a year's taxes exceed our dues. 2) It just doesn't seem neighborly. Perhaps I am just wrong headed here. But I feel that a "neighborhood association" should try to treat its members as neighbors when possible. (There are times to get tough, but running up the bill seems vindictive.) So I am wondering, is it possible to go to the lien without racking up high legal (and collection) costs?

BrianB
(California)

Posts:1748

08/08/2008 6:30 PM
i liened homes a couple times, and didn't jack up the costs like that. I DID force the owner to pay the cost of the filing and the unfiling, tossed in a couple extra bucks for postage, parking meters at the courthouse, etc.. You can always pad a bill, much like the handling part of shipping and handling. it depends on your motive: to hurt the HO, you add every dime. then invent a couple. To just recoup costs, add up what was truly spent, and make them pay that.

RobertR1
(South Carolina)

Posts:2513

08/08/2008 11:37 PM
Maybe Brian can tell us how he did this on the cheap, as compared to Kirk. We as associations have to be aware of economics and economic times. What would be good today may not have been good 5 yers ago because of all the foreclosures, if your group is being battered. Innovation has to be the key to cut your loses. But Kirk, the moral aspect is not your burden if you have good documents. What I mean is; when you file alien you are going to put a hurting on someone else. You might be required by your morality to to do the best you can but you will hurt someone, no matter how you slice it. It really is better follow your documents, innovate to satisfy them because of the circumstances. And if you don't act, you are hurting the association. "It's not your money" you are trying to save nor is it your money you are trying to collect.

GeorgerwilliamsW
(Indiana)

Posts:768

08/09/2008 12:29 AM
Robert, I was appalled when I read the comment, "But Kirk, the moral aspect is not your burden if you have good documents." To me, the moral burden is everyone's business. Law and contract does not substitute for morality. I can't say any more--the words simply are not coming to me. I am stunned.

RobertR1
(South Carolina)

Posts:2513

08/09/2008 4:33 AM
George, As you have posted George, "Be kind and cut me a little slack." The issue at hand is not anyones moral conduct. Moral conduct implies a decision. Kirk could be just as moral following the documents in his decision as someone saying , "My morality doesn't allow me make to this decision." Seems to fit this country pretty well. If you read I am encouraging folks to make immoral decisions, you are just plain wrong. But few of us go through life pure, so in that sense we are all or nearly all immoral. I don't think we can expect our BOD to always make moral decisions, that fit the definition of everyones conviction of morality. Is placing a lien on your neighbors property immoral. Is cutting a deal with a homeowner that will enable the association to cut their loses immoral? I think I will just retract the statement and blame it on poor choice of words and I opoligise if I offended anyone by by carelessness. Last night ceremonies I thought lacked visual impact, not because is wasn't spectacular, but because a lot was lost in the translation and limitations of TV. This morning, it seemed more people-ish (sic) and genuine. I am sure China has done what they wanted to do, but I am not sure it has much to do with the Olympic GAMES. But it has become in a small part of ,"Can you top this." It would be nice to see a small country Host one and cut off all the fat.

RogerB
(Colorado)

Posts:3725

08/09/2008 6:14 AM
Kirk, an attorney is not needed to file a lien after providing proper notice. It appears you have not established a Rule and Regulation on Delinquent Assessments; and your MC does not appear to be providing what I consider to be good guidance. I have previously posted on this subject several times. You may want to use the search button to review previous discussions on this. We recommend getting an attorney involved only when the HOA needs to garnish wages or go to foreclosure.

Roger Borcherding Official HOATalk.com Sponsor DARCO Property Management (Colorado) (303) 925-0150 *See legal notice below (end of page) or go to www.hoatalk.com/legal

MaryA1
(Arizona)

Posts:2498

08/09/2008 6:40 AM
Posted By RogerB on 08/09/2008 6:14 AM Kirk, an attorney is not needed to file a lien after providing proper notice. It appears you have not established a Rule and Regulation on Delinquent Assessments; and your MC does not appear to be providing what I consider to be good guidance. I have previously posted on this subject several times. You may want to use the search button to review previous discussions on this. We recommend getting an attorney involved only when the HOA needs to garnish wages or go to foreclosure. Better check state law first! In 2003 the AZ Supreme Court (which regulates the practice of law in the state) issued a rule modification redefining the "practice of law", which includes "preparing any document in any medium intended to affect or secure legal rights for a specific person or entity", which would include recording liens. Only a "legal document preparer" or a legal assistant under the supervision of an attorney can prepare and record a lien, among other legal documents. BTW, AZ is one of the only states in the union where the "unauthorized practice of law" is not against the law in the form of statute.

MaryA1
(Arizona)

Posts:2498

08/09/2008 6:46 AM
Posted By KirkW1 on 08/08/2008 5:56 PM Well I checked my email this morning before going to work and boy howdy did it give me a headache. Our management company wanted permission to send an account to legal for a demand letter (at about $150 cost) to an owner. The heck of it all is that end of the day the only reason the owner owes money is very high collection fees being added to start with. While I realize that all other owners should not have to bear the cost of collection for the few that don't pay, I wonder if the management company doesn't have a profit center at the cost of our members. The cost of sending a statement aside from the initial bill is $10. And things start going up from there. Along the way we have our lawyer send a letter that costs $150. Then they do a property search before placing a lien. And by this time the cost to the owner is 4 to 8 times the amount originally owed. While I recognize that people need to pay what they owe, this seems: 1) Beyond what is reasonable. No other organization does this kind of thing. I have seen lower costs for properties being sold for back taxes. And a year's taxes exceed our dues. 2) It just doesn't seem neighborly. Perhaps I am just wrong headed here. But I feel that a "neighborhood association" should try to treat its members as neighbors when possible. (There are times to get tough, but running up the bill seems vindictive.) So I am wondering, is it possible to go to the lien without racking up high legal (and collection) costs? Kirk, I suggest you take some time to read your contract with the mgmt co. All those costs should be outlined therein. Also, all those costs should be outlined in the assn's collection policy which should be provided to all members. One way to cut down on those costs is to NOT involve the attorney until such time as it becomes necessary to take legal action. I know of many assn's that have their attorney send the first letter.

EllenS1
(Florida)

Posts:400

08/09/2008 9:43 AM
Roger, In Florida an lien for HOAS must be filed by an attorney.

BrianB
(California)

Posts:1748

08/09/2008 9:55 AM
Posted By MaryA1 on 08/09/2008 6:40 AM Posted By RogerB on 08/09/2008 6:14 AM Kirk, an attorney is not needed to file a lien after providing proper notice. It appears you have not established a Rule and Regulation on Delinquent Assessments; and your MC does not appear to be providing what I consider to be good guidance. I have previously posted on this subject several times. You may want to use the search button to review previous discussions on this. We recommend getting an attorney involved only when the HOA needs to garnish wages or go to foreclosure. Better check state law first! In 2003 the AZ Supreme Court (which regulates the practice of law in the state) issued a rule modification redefining the "practice of law", which includes "preparing any document in any medium intended to affect or secure legal rights for a specific person or entity", which would include recording liens. Only a "legal document preparer" or a legal assistant under the supervision of an attorney can prepare and record a lien, among other legal documents. BTW, AZ is one of the only states in the union where the "unauthorized practice of law" is not against the law in the form of statute. How unusual... I lived in AZ then, and i never knew that. I did liens in 2004 and 2005, both filed and retracted, all by myself. the county recorder must not have known of the Supreme Court ruling either... lucky for me. Between liens, quit claims, wills and living wills, and power of attorney preparations, I broke the Supreme Court rule multiple times. Thank goodness it was only a court order I was violating, and not a statute. Thanks for the eye opening info Mary! wow.

MaryA1
(Arizona)

Posts:2498

08/09/2008 9:58 AM
Brian, I'm sure many are still breaking the rule. Besides, who would know except an attorney? The Co. Recorder doesn't can who brings in a document for recording, they don't even care if it's legal; their only job is to record it.

BradP
(Kansas)

Posts:1742

08/09/2008 1:40 PM
I have always thought piling on unnecessary fees and attorney's costs to a delinquent homeowner is vindictive and cruel...I filed a lien for $8 plus postage and passed that cost on to the homeowner. Now, if you state requires an attorney or legal assistant to do so that is one thing, if they don't then I think it is unfair to do that.

GeorgerwilliamsW
(Indiana)

Posts:768

08/09/2008 2:30 PM
Posted By BradP on 08/09/2008 1:40 PM I have always thought piling on unnecessary fees and attorney's costs to a delinquent homeowner is vindictive and cruel...I filed a lien for $8 plus postage and passed that cost on to the homeowner. Now, if you state requires an attorney or legal assistant to do so that is one thing, if they don't then I think it is unfair to do that. Just what I would have said. Right on target.

MaryA1
(Arizona)

Posts:2498

08/10/2008 7:57 AM
Brad & George, I honestly agree with both of you. I think this might be one of those "six one way, a half dozen the other" situations. I can see where the AZ Supreme Court would rule that only a legal doc. preparer or attorney can prepare legal documents but I can't help but wonder if it doesn't only help to pad the pockets of the attorneys! I'm sure there were many instances where legal documents were prepared by novices who didn't know what they were doing, thus creating many problems. However, perhaps preparing a lien is not one of them -- I don't know. Not being in the legal profession, I really can't judge.

SidneyP
(Florida)

Posts:292

08/10/2008 9:48 AM
This is not true...anyone can file the lien..Board member, MC or HO...it cost $10.00...the attorney charges $325. I just called to see if there was a change.the answer was NO.

MaryA1
(Arizona)

Posts:2498

08/10/2008 9:50 AM
Sydney, It IS true for AZ -- anyone cannot do it. That's why I suggested checking state laws.

KirkW1
(Texas)

Posts:1190

08/10/2008 8:25 PM
Here is the deal - We have a collection policy which was written before the turnover. At a meeting regarding finances the vice president of the management company made the statement that we "need to let them do their job." I have no doubt that the collection policy was mostly written by the management company. But at any rate here is a breakdown of how things go: 1) HO receives bill in November for dues that are owed on Jan 1 and delinquent Feb 1. 2) A billing statement is sent out for those not having paid by Feb 1 at which time the HO is hit with a $25 late fee and a $10 fee for sending them the bill. 3) After 30 days a reminder notice is sent at a cost of $15. 4) Another 30 days and a demand letter is sent from the management company at a cost of $20. 5) The account is sent to the attorney who sends a demand letter ($150). 6) A title search is performed and another letter sent from the attorney ($450). 7) A lien is filed at a cost of $250. 8) Foreclosure is authorized. Now before they get to step 8 the owner has not paid for more then two years. Our dues at $200 a year paid annually. I have no issue with paying the attorney to file the lien. I do have an issue with paying the attorney $150 to send a demand letter. I have a problem paying $450 for a title search that is probably not needed. In short, it would appear to me that the current policy is designed to help the management company and the attorney. It doesn't hurt the HOA (if the owner pays) because all the costs are passed to the owner. I have a moral problem (regardless of the legality of the documents) of running up a larger bill on the owner. If we can lien without the title search and demand letter from the attorney it would seem a much better way. As a note, I notices that the collection policy directly contradicts the covenants in stating that the monies owed does not pass with the land. I know that the covenants over rule, but that little tidbit bothers me. Because the declarant owns three properties, they hold veto power over any changes so we may be a little while before we can change it. But I think the ownership would agree with buying at least two of the properties if that would allow us to fire the current management company. Nobody seems to like them.

SidneyP
(Florida)

Posts:292

08/11/2008 6:17 AM
Mary...it was Ellen's post I was refering too....I have done it here in Fl. myself...and will probably do it again because we have no funds to pay an attorney ......I agree with you, I'm sure other states are different.

RogerB
(Colorado)

Posts:3725

08/11/2008 8:18 AM
Kirk, more than 2 years on a delinquent account is too long. Following are collection policy suggestions with foreclosure initiated within 5 months. These procedures usually may be established by the Board as Rules and Regulations. Does onership of 3 properties give them veto power? Do they control the Board? 1. Statement mailed November. Advise on statement that payment is due by January 1; account becomes delinquent after a 10 day grace period for receipt of payment; and there is a $25.00 per month late charge until entire balance is received. 2. If not received by 1/12 send a second statement which states if payment is not received within 30 days a lien will be filed. Offer the delinquent party the opportunity of a payment plan if they can not pay the entire amount due. 3. If no payment or response is received by 2/15 send a third statement that payment has not been received and if not received in 10 days a lien will be filed against the property at a cost of $$(high enough to encourage payment). 4. If not paid by 3/1 file the Notice of Lien and send the Owner a statement, demand letter, and a copy of the lien. Advise that if payment is not received by 4/1 forclosure on the property will be initiated (or consider personal garnishment of wages and other assets if there is not sufficient equity in the property). 6. If still not paid by 4/1 try to encourage their mortgage company to initiate foreclosure. If not sucessful then hire an attorney to initiate foreclosure. Send copy of all correspondence to the attorney for their review prior to filing. In regard to your other comments: * Remember that when an Owner is delinquent, an attorney may make the problem worse. Also, when an Owner can not pay and the property must be foreclosed then the HOA will be required to pay the legal costs and property values in the HOA will go down. * A title search can be done by you OR require a copy of the warranty deed with each title transfer. * Past due assessments do not carried forward to the new Owner when there is a foreclosure sale.

Roger Borcherding Official HOATalk.com Sponsor DARCO Property Management (Colorado) (303) 925-0150 *See legal notice below (end of page) or go to www.hoatalk.com/legal

MaryA1
(Arizona)

Posts:2498

08/13/2008 9:41 AM
Kirk, I can certainly understand your concerns. The fees you outline do appear to be quite excessive. FYI, following are the fees charged by my assn to collect delinquencies(we contract with a mgmt co): Our assessments ($115/qtr)are paid quarterly. An invoice is mailed out each quarter; assessments are due in full on the 1st day of the quarter and considered late if not received by the 30th day of the quarter. 30 days delinquent: h/o is re-billed at a fee of $5.00 plus a $15.00 late charge. 45 days delinquent: demand letter sent at a fee of $10.00 60 days delinquent: account sent to attorney for collection at a fee of $25.00 1) The assn attorney charges $75 to send a demand letter 2) The assn attorney charges $205/hr for other services 3) A title search is required b/4 filing a lien 4) When a home is in foreclosure, a transfer fee of $75 is charged to the new owner when the title changes; this covers the cost of providing the required disclosure info (copies of gov. docs, etc). This is required even if a bank owns the property. The assn tracks the foreclosure to ensure they are aware when the title changes. If a bank is the new owner, the assn bills the bank as they would any other new owner.

DwightT
(Idaho)

Posts:483

08/13/2008 10:33 AM
Just to add a twist on this, we've recently run into a situation regarding our collection process. Our dues are $400/year. Bills go out the first week of January, and are to be paid by the end of January. If not paid by Feb. 1, a second bill is sent. No late fees yet, but a notice is included that if not paid by March 1, late fees will be assessed at a rate of 18%/year as allowed by the CC&Rs. This comes out to about $6/month. Statements are sent to any homeowner who still has a balance due in March, April, and May showing the late fees. If we hear from the homeowner and they try to make payments, we continue to charge interest on the unpaid amount, but we don't take further action. If we don't hear anything from the homeowner, in June we send a certified letter demanding payment. This letter includes a notice that if payment is not received by July 1 we will file in small claims court. The certified letter also incurs a $20 administrative fee charged by our management company. When we file in court, another administrative fee of $285 is charged, plus a $35 filing fee. It may cost an additional $75+ for a process server. So with all of these late charges and various fees we are up to $770 after 7 months. All of those extra fees become limited assessments against the property. Recently one of these homes sold in a short sale. The title company called our management company in early June for a payoff amount, but escrow did not close until mid July - after the $285 admin fee & $35 filing fee had been charged. They sent a check for the amount that they were told back in June. Since our docs state that assessments are "a charge on the land" and "shall pass to his successors in title", this means that the new owner is responsible for the balance due. In our opinion though, the title company screwed up - they should have called for a new balance closer to the actual closing date, so we feel that the title company should pay the balance. The title company of course disagrees. They plan on attending our Board meeting next week to discuss our process with us.

KirkW1
(Texas)

Posts:1190

08/13/2008 11:08 AM
I wonder if you sent the updated amounts to the title company. I think that once you know that a property is about to be transfered it would only make some sense to keep the title company in the loop. For that matter, why not check with the title company before going through a court filing (and racking up fees)? If the property is still on the table then you really have no reason to not wait an extra month for the money. The title company will ensure that you get paid.

BradP
(Kansas)

Posts:1742

08/13/2008 11:23 AM
Dwight: I think both parties are at fault...the title company in my opinion should have called closer to the date, but the the Board knowing this was a delinquent property should have kept closer tabs on things.

DwightT
(Idaho)

Posts:483

08/13/2008 11:35 AM
I agree that our process could use some tweaking and I hope that will be the result of meeting with the title company next week. However, without getting into a "It's not our responsibility..." type of argument, there is still a limit to what we can/should do. Typically when a title company calls us, they don't give us any indication of what the anticipated closing date is. They just ask for the current balance due. So when the next date comes around if we haven't heard anything else then as far as we know the deal has fallen apart and we should proceed as before. I would like to make it part of the policy that we hold any further proceedings for 30 days from when we give a balance. But as part of that policy the title company should be expected to notify us by the next business day if the deal does fall apart so that we can proceed with our collections process. Our CC&Rs does include this provision: "The Association shall, upon demand, and for a reasonable charge, furnish a certificate by an officer of the Association setting forth whether the assessments on the specified Lot have been paid. A properly executed certificate of the Association as to the status of assessments on a Lot is binding upon the Association as of the date of its issuance." To date nobody has ever requested such a certificate. They just call and ask for the balance.

DwightT
(Idaho)

Posts:483

08/13/2008 11:51 AM
Posted By BradP on 08/13/2008 11:23 AM Dwight: I think both parties are at fault...the title company in my opinion should have called closer to the date, but the the Board knowing this was a delinquent property should have kept closer tabs on things. Brad - I don't disagree - there should have been better communication amongst all parties involved. In this specific case the only thing we knew was that the dues had not been paid for this property. We were not aware that the property was on the market or that the mortgage was not being paid, leading to foreclosure. Since we were moving forward in the process with several other properties, this one was just included in the batch. As a lame excuse, we just had another property where the owner transferred the title from a business name to his personal name, then transfer it back to his business name again. As far as we knew, this was just the same sort of thing (our unconfirmed suspicion is that he thought that by transferring title he could get out of paying the dues).

KirkW1
(Texas)

Posts:1190

08/13/2008 12:21 PM
Here are my ever developing thoughts on the subject: When the bank specifies a payoff amount it has a time limit. The same when a rate lock is issued for a home. If the close goes past the date then the title company has to find out the updated numbers. I would not believe for a second that mortgage holders give up fees because of delayed closing. Along the same lines, I think that the HOA should do the same thing in regards to a delinquent account. Specify the amount due up until the next period for adding interest. At that time you can find out if the home is still at the title company and know if you just add interest or proceed with other collection efforts. For what it is worth, my gut is to file a lien as soon should you find out the title company no longer is planning a transfer.

DwightT
(Idaho)

Posts:483

08/15/2008 7:56 AM
Just to tie a couple of threads together.... Looks like we had another home change owners in pretty much the same situation. After digging some more, it's starting to look like this issue may have been created when the title company called for the balance due. The MC gave them the amount as of that date, which included the HOA dues for the year, late charges, court costs, and administrative fees that had been charged by the MC. When the payoff check came in, the MC applied it to HOA dues, title transfer fee, late charges, court costs, and the administrative fees. Notice the extra bit in that last list? It looks like the balance given to the title company did not include the title transfer fee since it had not been incurred yet. We had a discussion on this forum not too long ago about title transfer fees and what they are for. In my opinion, unless there is a cost to the HOA in the transfer, then that fee should not be charged. But since it is specified in our CC&Rs we do usually charge it. In this case, since the MC neglected to inform the title company of the charge when they called for the balance due, I think we are going to have to waive it. And I think I'm going to take a closer look at the transactions in the other transfer and see if the same thing happened there as well.

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