What is community's recourse for unpaid dues?

Dear Forum Posters:
There has been a lot of postings on moving to POA (Property Owners Assn.) from HOA in order to collect unpaid dues (not fines) from unit owners.
However, there must be some other recourse an HOA has to collect dues rather than taking this drastic step. To put a lien on an owners property (for future sale) does not put money in the pot now when bills must be paid.

Since dues are to cover maintenance services (ex.; snow, lawn, trimming) is it appropriate and LEGAL for a Board to withhold these services from the one/ones who are consistently not paying monthly dues (not fines).

How have communities handled unit owners who consistently do not pay their monthly fee.
PaulM

You're going to have to study your association documents to find what you can do to collect. Even if it's legal to withold lawn mowing for failure to pay dues, would you want to? Would you want one or two homes in each block to have overgrown lawns? How would that look? Also, your lawn maintenance contract probably covers the entire area. The landscaper would not likely lower the price to skip a few properties.

Do you have ammenities? Pool, club house, etc.? You can suspend their privleges. You can suspend their voting rights. Stop sending them newsletters.

Keep after the people who are not paying, add any late fees that you are allowed to add. Send them overdue notices and give a deadline for payment after which you will file a lien. Have your attorney send them a letter (and charge them the cost of producing the letter). You may need to raise dues or reduce services in the meantime if this is creating a financial burden for the association.

Paul:
Our association has 167 homes with twelve homeowners owing over $16,000 in back assessements. (some going back three or four years)
Our past attorney kept stalling around, because he received his fees regardless of wether the association collected anything or not.
We have dismissed him, and have a new attorney who is aggressively going after garnishment of the homeowners pay checks.
What could be worse then to have your employer know you are NOT meeting your financial obligations?
We made inquiries about cutting off their water, etc; but were told to do so, you had to go onto their private property to reach their water valve. As we are on the same line, and the association pays the total bill each homeowner has their own individual shut off valve for emergency purposes.
Foreclosures in Maryland, where we live can cost $5,000 to start the process, so this is the most cheaper way to go.
Don't forget too, those not paying their assessement fees are STEALING the services being paid for by those responsible homeowners who do pay on time.

Jim

Now there's an idea that hasn't been posted before. And a good one at that. Thanks Linda.

JC3:

I am not saying you can't use a collection agent or garnish wages, just in our circumstances we were advised not to. When someone has over 3 years worth of unpaid dues, and gets notices 4 times a year I don't think filing a lien is uncalled for.

I agree that sometimes a lien isn't the best approach at first, that is why before anything is filed we send a 30 day notice letter asking them to contact us if there are extraordinary circumstances. I don't feel it is my duty to go door to door. They owe us the money, if they need help they need to ask for it. I am all for being nice to people, but if I am having trouble I am going to take the proactive step to contact my creditors and not wait for them to contact me.

In our case we aren't using an attorney to file a lien, all we have to do is simply submit a form to our Register of deeds with the amount owed and an $8 check to cover the cost. So our lawyer is not getting rich off of his advice.

Hi PaulM – Withholding services such as use of a swimming pool is a good idea. We do not have much in the way of services that could be easily withheld form a delinquent HO (no pool, clubhouse, and the like). We do place liens on their property, but our enforcement process goes a step further and can lead to their eviction – all done in accordance with the Fair Debt Collection Practices Act, and IL Forcible Entry and Detainer Act. The steps are:
1. send collection letter providing 30 days to dispute or pay off debt
2. within 7 days of that letter, order tract book search to ID legal owner
3. send “30 day notice and demand for possession” letter if account not brought current within the 7 days from previous letter
4. record lien at same time
5. after 30 days, “complaint for possession” prepared/filed with Clerk of Circuit court –both a money judgment against HO as well as an Order for Possession is requested
6. this results in a Summons and Complaint being served to HO by Sheriff
7. next step is the trial
8. court enters an "order for possession" in favor of HOA; there is a “stay” period of 60 – 180 days before eviction can take place

Once this process is in place, the HO has usually come to realize the severe consequences due to their delinquency and will agree to a payment plan for dues, fees, and legal costs. As a rule of thumb we set it up such that the debt is paid off within several months.

Also note that court has discretion with regard to late fees (not included) and legal fees (usually included).

We also have another option, which is to file a breach of contract against the HO, which could lead to wage garnishments (we do not do this).

As for the issue that in the meanwhile the rest of the HOs are left paying for services – we have established an operating contingency reserve so that we can ensure we have enough to pay the bills. We also budget for legal fees - which are paid back via another income account when HO has paid them.

Check your state’s laws on whether your HOA could proceed in this manner.
Good luck! Bonnie

PaulM,

This is my first year serving as a board member. I have been told that you must mail (certified), signature request preferably the delinquent homeowner a statement showing all assessments owned. You must also notifying them that on (such and such day) they will accrue a late fee if they do not pay this account if full.(in your documents as well) You must also notify this homeowner the day you will be turning the account over to the collections attorney if account isn't paid in full.

The homeowner has a certain amount of days (per your documents) to have the assessment (s) paid in full. In that same letter you must give them plenty of notice, that on such and such day (your documents specifies) your account will be turned over to a collections attorney. To avoid any legal action, payments of assessment owed are due in full. Hopefully they make arrangements to pay the account off or send it to your collections attorney. He/she will now have the power to do what is necessary to actively pursue this account.

I believe the attorney will send the delinquent homeowner a letter notifying them that their account is now being handled by “so and so collection attorney” I believe the delinquent homeowner is responsible to pay any and all fees once turned over to the collections attorney.

The attorney will then notify the homeowner that on this day (collection attorney’s procedure) a lien will be place if payment is not received, and delinquent homeowner will be held accountable for any and all fees added to their account. The association must pay for these expenses up front, but these additional fees are added to the delinquent homeowners account, reimbursing the association once the homeowner pays on the account. “ takes money to make money”

I do know if a payment arrangement is made all money applied to the accounts goes toward interest, attorney fee, and later fees first then once those expenses have been paid, all additional payments will go toward assessments.

Usually once a letter is mailed from the collections attorney notifying the homeowner that their account has been turned over to the collections attorney and a lien will be filled on (such and such day) they (delinquent homeowners) tend to settel on the account in full or they may even set up some sort of payment plan with them.

I hope this helps. It’s a learning experience for me.

The board and I meet with our collections attorney last month to know exactly what his procedure was in pursuing delinquent accounts. It was very insightful.

Best of luck
Chuck W.

Not everyone pays; we have someone who is so far in debt we are paying to force her out by Sherriff's sale. How is someone using but not paying for something that others are paying for any different than filling up at the gas station and taking off without paying? Is it OK if you go back later and pay them a little extra?

How have you let that happen? Four years? The longer it goes on, the harder it's going to be to collect and if others find out you are not collecting, they too may stop paying.

You go on to say these people are "stealing" from the other members but another way of looking at it is that your association is "giving" these people free membership by their inaction.

Best of luck collecting.

I'd say!

Our association could not exist with $16,000 owed to it.

I too am new to this and have begun to realize that our financial situation is not what it should be. A board years ago apparently lowered the assessments because they didn't feel they needed the extra money (reserves). That may have been popular but it was a bad decision.

We can only raise them 10% per year and I suspect we're going to have to do this for several years to come.

We have six (6) delinquect accounts amd have been for two (2) years + (and dues were assessed again on Jan ist). Several of these properties are rented and have been rented the whole time. Is there any way we can go after the rent money? The HO's are making money while our association is going under from lack of assessments collected. Can we garnish their pay in Flordia? Although I do believe they are retired investors.

There are definite steps to take to eliminate delinquent accounts, including:
1. Establish Rules and Regulations on Delinquent Accounts;
2. Have high enough late charges and lien filing fees compared to the amount of delinquent assessment which will encourage the owner to pay this bill rather than another, when their money runs short; and
3. Provide early and often notices which makes the owner aware that non payment will result in much high costs and will ultimately lead to filing a lien by the 3rd month.

Our system has worked for many years with no lawyers involved! As our ad states: DARCO has 100% success on collections and Covenant compliance & never been to litigation.

PaulM

This is the first year the board has actively begun to pursue delinquent accounts. The previous boards just made threats, and never ever followed through. There were homeowners that were several years behind in their assessments with just a lien filed.

* I did find out that once a lien is filed it actually expires in four years, which from now on we plan on collect well before that point.*

As of right now everything seems to be going as well as can be expected. We (current board) aren’t favored by the majority of the community because our determination and our promise to maintain the community and we are aggressively enforce the governing documents.

We have filed suit on several homeowners, and have collected several thousand, which is extremely beneficial to the community.

Presently there isn’t anything I would do different, because everything is going as good as it can. We are spending some money to make even more!

“It takes money too make money”

Chuck W.

Our annual assessments are due in two installments, Feb. 1st and April 1st. They are considered late on April 10th in which an 18% late fee is added. If you are 90-days past due, a lien is filed. While most people end up paying, we have a few that have lingered. Last year, the board decided to be more aggressive go into collections on anyone who had not paid their 2005 assessment. We waited until Feb. 1st so that we could roll the 2006 assessment into collections in an effort to save money (in case a law suit resulted). We accepted payment plans on one person (who never paid). We have one person who has paid a year late for the past three years (now she wants her late fees and legal fees waived)...she has just paid part of her 2006 fees and the 2007 fees are due. We have two homes that have a judgment with a combined total of over $7,500. The one person we are trying to find out where they work in order to garnish wages. The other was under foreclosure 3 times in 2006 and is trying to file bankruptcy for a 2nd time and we cannot do anything right now. Our neighborhood desperatley needs to become a POA. Should the house trying to file bankruptcy foreclosed, we will be out all of that money. The good thing, our collection attorney does not get paid unless they collect.

Charles I disagree with your comment - Filing a lien should be something your association does as soon as the amount owed it greater than the cost to file. Hypothetically, let’s say that the cost to file a lien is $300.00 and the delinquent homeowner only owes $292.00 then NO this wouldn’t be a wise attempt to collect, Although, I know the association would certainly like to collect all money owned, many times its not as easy as you or I would like it to be.

This would only be true if your State does not allow you to recover the costs. In Ohio your example would cost the delinquent HO $592.00 the $292.00 they owed + the cost of the legal filing and whatever the costs to remove the lien not to mention our attorney's fee.

GlenL

I hear what you are saying. Like you I too can add any and all attorney fees, late fees, interest and the get reimbursed for the cost of filing and any other expenses that had accumulated.

I was suggesting that it’s difficult enough to collect on assessments that are of a larger amount, but it wouldn’t be a very wise business decision to spend money (many associations struggle to acquire) on an amount that could be settled by other means. After all else has failed then YES I suggest turning it over to the collection attorney to recoup all money owed. Generally this amount is much greater than the filing fees.

I hope, I’ve clarified where I stand on this issue.

Chuck W.

RogerB.............. How would one handle an HOA that does not have establshed Rules and Procedures on delinquent accounts ???
EXAMPLE............... Member came to be the Monday after Easter.... I asked why his kid was not at Easter Hunt....he said that management forbade him from going because their account was 60 days.... He showed me documentation that his bill was paid..(the 60 days past due,,,) the new bill for April came out the first week and is not due until the 25th of the month........Management says that he had to pay the 60 day past due PLUS the April bill to be considered current.... I thought if the bill wasn't due and payable till the 25th and he paid his past due he would be current....I can't believe that an HOA would deny a 5 yr old the right to participate in an Easter Egg Hunt with the other kids because of this matter.... We do not have a written policy with regards to this and they kinda make the rules up as they go.... They also PUBLISH peoples name and the amount owed on a 30- 60 - 90 day list each month where everyone can read it...... I vaguely remember a previous post where it was against the law to do this ???? Please correct if I am wrong ?? Would love to state this at our BOD Meeting on Sunday if indeed this is true.............LindaC

Linda:

There have been several posts on here about publishing names of delinquents and I agree 100% with Roger that it is not good. It may not be against the law, but imo you open yourself up for litigation. Whoever did not allow the 5 year to participate should be ashamed of themselves, they should not be punished for their parents actions. These are the people that give HOA's bad names.

Sorry, must be one of those days
The following apply to a specific HOA in Colorado. Restrictions on participation of owners and family members Delinquent properties are located in By-laws.

Rules and Regulations on Delinquent Assessments

Assessments are delinquent when payment has not been received by the due date. A 10 day grace period is provided for receipt of payment after which the property is assessed a late charge of $10.00 per month.

Assessments may include, but are not limited to, the annual (regular) assessment, special assessments, late charges, interest, fees, fines, attorney fees, collection costs and court costs. All costs related to a delinquent account shall be assessed to the property and paid by the owner. The Declaration (Covenants) establishes that an assessment is a continuing lien upon the property and a personal obligation of the owner.

The annual assessment is determined by the Board of Directors as part of the annual budget. The annual budget is ratified, or vetoed, by homeowners at the annual meeting. If the members veto the budget, then the prior budget, including the annual assessment, remains in effect until a new budget is approved. The annual assessment may be paid on a quarterly basis with payments due on the first day of each quarter beginning January 1st, April 1st, July 1st, and October 1st. Assessment payments shall be applied to the oldest assessment first and progress toward the most recent assessment.

Statements may be provided by mail, e-mail, or coupons as a reminder to homeowners of the amount and due date of a quarterly assessment. Nevertheless, it is the responsibility of the homeowner to remember to pay by the due date even if a statement is not received. An owner may request consideration by the Board of Directors to defer payment due to extenuating circumstances.

An account delinquent over 10 days will be charged $10.00 each month it maintains a balance over $10.00. If a check is returned the account becomes delinquent plus there is a charge of $35.00 for the returned check.

An account delinquent over 70 days shall be provided a warning that a lien will be recorded on the property if payment is not received within 30 days.

An account delinquent over 100 days will have a lien filed with the Douglas County Clerk. The lien amount will include a filing charge of $100.

An account delinquent over 130 days shall be provided a warning that the account will be referred to an attorney for collection if not paid within 30 days.

The Association shall make a good faith effort to resolve disputes first with the Owner. If resolution is not reached the Association stands ready to go to binding Arbitration under the Uniform Arbitration Act. The parties are herein forewarned that if court proceedings are necessary to resolve a dispute, the court shall award to the prevailing party reasonable collection costs, attorney fees, and other costs.

Actually, publishing the name of the person, address, lot number and the fact they are being foreclosed on is to be PUBLISHED in the newspaper. It is part of the foreclosure process. It's called "PUBLIC NOTICE" and is used so that the person has no excuses they weren't contacted or didn't know about it. The person can try to refuse letters, certified mail, or even not give a forwarding address as to "try" to avoid a foreclosure. However, putting the notice in the LEGALS section of the local newspaper or other publication serves to override all other forms of notice. It's considered the legal way of proper notification. It's much like filing for divorce and the other spouse doesn't respond. The filing spouse can run a notice in the newspaper (of their choosing) and say that this person has so many days to respond, and if they don't, the divorce will be finalized.
There is a DIFFERENCE between the above type of notice and posting this information on a bulletin board or HOA newsletter. The above is a LEGAL GENERAL PUBLIC notification and the other may be considered "slander". Slander is proven if it is written. You should NEVER EVER reveal a person's name of who owes money in a HOA. Let the HOA board handle it. Collections are private and should ONLY be shared on a one on one basis.
My best example of this is: You go into the hospital for emergency Prostate Surgery. During this time you are unable to pay your dues. The HOA contacts you and you make arrangements to pay them when you can. However, you don't get to pay them until the established "lien" limit has been reached. You've made arrangement privately due to the nature of your illness but do you want EVERYONE to know about your prostate? You might have to explain to everyone why you had to behind in your dues. NOT very fair and embarrassing is it? So allowing a HOA to post you owe money could force you into revealing private information.

HOA foreclosures and Mortgage companies use the SAME method for legal foreclosures. The procedure of placing a foreclosure is to give public notice in a newspaper publicly notifying the owner of the procedure pending. IF there is a response to the ad, then arrangements are made. If NO response is attempted, the rest of the process goes on. That includes at public outcry on the County courthouse steps, the property being put up on PUBLIC auction.
Keep in mind a foreclosure STOPS as soon as the money owed is PAID. That money can be paid up to the LAST minute prior to the auction. In my state, a foreclosed property can be bought back AFTER a foreclosure for up to a YEAR AFTER the auction IF the owner pays the money owed, the cost of the foreclosure, PLUS any improvements the new owners have done. (adding pool, deck, etc...)
A foreclosure is a foreclosure and a legal instrument. A lien is also a legal instrument and is considered a "Judgement". These legal instruments are the SAME options an individual has to collect money, it's just done by a group instead.
My best example is this: You sell your car for $5K. The buyer ONLY pays you $2K. What are your options? The first is to place a lien on the title of the car preventing a clean title. No clean title, they can't license the vehicle to drive it. If you sue, the car can still be driven by the other person while your waiting to win in court. The last option, is that you can seize the property. (Same as foreclose). However, if the buyer does pay the remaining $3K, they can keep the car.
Why deny the group of homeowner's your associated the same right you have as an individual if someone doesn't pay? If you don't allow your HOA to place liens/foreclose for members NOT paying, you do NOT have any other legal options. The law only allows the above legal ways of getting money/property back. Sometimes you can't always be the nice guy!

Most states do NOT allow for fines to be part of a lien or foreclosure. I am not sure about florida so someone correct me on this. A HOA can ONLY place a lien for 2 reasons: 1. NOT paying dues/assessments. 2. The HOA Fixing a violation themselves and the owner refusing to pay the repair bill.(RARE).
I have to say the owner in violation is doing the right thing and just paying the assessment and NOT the fine. They don't have to. I would be careful since your dealing with a pretty smart homeowner who seems to know what they are doing.
The HOA is also making a MAJOR MAJOR MAJOR MISTAKE if they are going to go to small claims court. HUGE MISTAKE!!! Did I emphasize that enough? The ONLY thing the HOA is going to get is a HUGE legal bill and most likely lose. If they do win, they will ONLY get a "Judgement". This "judgement" does NOT guarantee they will EVER see the money. It could take years to collect. A judgement like the one awarded in small claims court allows the owner to MOVE and SELL their property withOUT paying a single dime to the HOA. A lien is also a judgement, but they owner can NOT SELL the property until the money is paid off. The owner may MOVE and use the property as rental but they can never sell the property until the lien is paid off.
So which do you think the HOA should have? A court judgement that allows the owner to sell and NOT pay for years? OR to have a lien and the owner can NOT sell until money is paid?
I am sorry, but suing the HOA is suing yourself and your neighbors. The HOA has put itself in a position where it now has to pay an attorney a retainer PLUS attorneys fee (per hour/conversation) and court costs for a battle that isnt' going to get them much or any money. Plus the HOA will have to remember to also request that their legal fees be part of the settlement if any. If that isn't part of the judgement, then all the legal costs go out the window.
I would expect a special assessment coming up soon or an increase in dues in your HOA if this behavior of their keeps up. It seems they are digging themselves deeper into holes you all don't belong in.

Most states do NOT allow for HOA's to go to court over fines. Fines are above and beyond the operations of a HOA. It's considered a "punishment". It is NOT considered "income". If it is "income" then the HOA has a right to collect. However, "fines" are subjectible to various opinions/rules. What I may consider a violation, another may consider a temporary solution to a temporary situation. For example: I as a board member see your vehicle parked on the street and cite a fine. However, as the owner, you parked the car on the street because you were washing the other car and had to move the car. A good reason and defense for a fine violation don't you think? Courts would too.
I am NOT saying that all states take the same views on HOA fines. There are states that do allow a HOA to collect fine money. If it is in the right context of the law. Like Donald Trump putting up his super-size flag. His HOA has been levying a fine on him since he put it up. However, their CC&R's do call for a fine to be placed on such violations and a specified amount. If your HOA don't have fine violations defined or amounts, then most likely they aren't really enforceable. It's not part of the original "contract". (CC&R's). By-laws are overrided by the CC&R's and if the fines aren't in the CC&R's but in the By-laws, you may still NOT be able to levy fines.
Fines are a two-edged sword. For board members, it's a mean to enforce the rules and pay for any damages occurred. For homeowner's in violation, it's a dictatorship form of enforcement that is unfair to them. So which side of the sword do you fall on if your a board member and get caught parking on the street?

Melissa:

I am not an expert on laws, but buying into an HOA is a contract. Part of your contract is to uphold the rules or you are subject to penalties. I would think as a breach of contract an HOA would be able to go to court to collect damages (fines) because of the breach of contract on owners part.

I have never tried or researched, maybe Roger has a good thought on it.