How do you enforce non-payment of HOA fees?

We have a unit owner who is constantly delinquent. This time, he's almost 5 months past due. We're a new board, so this is new to us. I know we can put a lien on his property, but that doesn't put the money in our pocket right now. Our by-laws have a provision regarding "involuntary sale" which, by the looks of it, allows the association the right to revoke all of the owner's rights to occupy or control their property. I was amazed to see that in there and, quite honestly, it seems like it would never hold up in court.

Bottom line: We want to collect what's due from this owner by any means necessary and allowable by law. What are our options?

As people can tell you all over this site, suing someone is easy - getting paid is another matter. Some homeowners try to hold off the association by filing bankruptcy (sometimes several times) because bankruptcy stops all collection activity until the court sorts it out). Others may realize you're serious when they get a court summons and contact you to negotiate a payment plan.

If you win your lawsuit, you could ask to garnish the homeowner's wages or force a sale of other assets, such as a car (if you know where they are), but there are pros and cons to that too - and when it gets to the collection stage, you may need a lawyer who knows how to navigate all that.

In our community, we start with a lawsuit against the homeowner and file liens when previous legal action doesn't work. We can pursue foreclosure 90 days after the lien is filed, but even if you wind up with the house, that doesn't necessarily "put money" in your pocket.

In fact, association foreclosures take time, are expensive, and because the mortgage company's lien supersedes yours, it'll have first dibs on any proceeds from the sale of the home - you get what's left, if there is anything. More often than not, you'll get nothing - but at least you'll be rid of the deadbeat, opening the door to a new owner who will pay on time.

So, start with a lawsuit, but remember you may end up having to file the lien anyway. Depending on how much is owed and the small claims court rules in your area, you may be able to go that route and not need a lawyer. I suggest, however, you talk things over with the Association attorney so you'll know your options and how far you're willing to go. Good luck!

Well, we’ll have to agree to disagree on the lawsuit. You’re right in that it can be a waste of time and money with some people, but by the time I stepped down as Board treasurer it became clear that we needed to drive home the point that if one didn’t pay assessments, bad things would happen and it wouldn’t end well.

Or notify the property manager when you have a financial hiccup (or several) so the Board can negotiate a payment plan before the account gets sent up to the attorney.

OR let the attorney know what’s happening when he sends a demand letter before filing the papers (better to pay attorney’s fees for a few phone calls and letters, than phone calls, letters and court costs on top of the collection costs, delinquent fees and late fees that sent you up in the first place.)

(By the way, our board voted to adopt your community’s policy of filing a lien after 6 months! of delinquency. We can pursue foreclosure 90 days after that, but we’re hoping somewhere within that 9 month timespan, something will happen that results in payment).

Back to lawsuits – one has to start somewhere and if there’s a chance a lawsuit gets the money sooner, I prefer doing that. I also want a judgment in place just in case something weird happens and the homeowner somehow comes into money or something else we can attach.

Example: we had one case where the homeowner fell behind and she was sued. During the hearing, our attorney learned it happened in part because she’d gotten injured and had to sue the electric company after a power line pole smashed her car (really!). I don’t know why she didn’t tell our property manager this before we sent up her file or the attorney when he sent out the demand letter before suing her (thus avoiding the lawsuit), but our attorney then attached the eventual settlement and we got our money when the company settled.

After we win our lawsuits, they’re followed by another hearing where the homeowner has to disclose his/her income and other liabilities. The judge and lawyers hash out settlements from there, and for things like garnishments, we need a judgment before we can pursue that route. Sometimes people are more spooked by lawsuits as opposed to a foreclosure (maybe because the former happens a lot sooner).

So, you need to have a number of options available and talk to your attorney about which ones make the most sense and have the best chance of getting your money.

Mel said:

No matter if you are pro lawsuit or not, you need to understand the options. Plus the pros and cons. Each situation is different and the solution may vary. Like you said lawsuit works for some. If you think this person would respond to lawsuit then consider it. If your dealing with investor type owners or those you think will run, lien is good idea. Just be careful as people may question why 2 different methods. It may come off as unfair. However, it is already unfair them not paying.

I agree.

I would add that some things are just not worth pursuing even when one is right.

One does not need a social security number to report info to the credit agencies.
It just makes the reporting easier.

Here is more info on that:

Information About Credit Reporting without a SSN by bills.com


The cost of which, would be added to the cost of collection


Actually, this is incorrect.

A lien is against the property address.
A lawsuit is against the individual(s) who own the property. If a judgement is obtained via a lawsuit, the plaintiff can ask the court for an order to lien any other property the defendant may own. If the property happens to be in another State, additional work may be required.

Ron you should have a collection policy and be following it. If you get to the foreclosure stage, Ohio has an interesting wrinkle that may help you. After the HOA files for foreclosure, you can ask the court to appoint a receiver and collect rent from the owner while you wait.

5311.18 Lien for common expenses.

(B)

(2) In a foreclosure action a unit owners association commences pursuant to division (B)(1) of this section or a foreclosure action the holder of a first mortgage or other lien on a unit commences, the owner of the unit, as the defendant in the action, shall be required to pay a reasonable rental for the unit during the pendency of the action . The unit owners association or the holder of the lien is entitled to the appointment of a receiver to collect the rental. Each rental payment a receiver collects during the pendency of the foreclosure action shall be applied first to the payment of the portion of the common expenses chargeable to the unit during the foreclosure action.

We got a court order for the Sheriff to sell the delinquent homeowner's vehicle. He paid. Cost him an extra $900 (our expenses).

Under our docs and PA law, we can both go against the RE and against the HO's personal property. Your docs and state law may be different.

How we did it:
1. We got a personal judgment for the delinquency against the HO from the courts. The HO didn't show up at the hearing so we won by default. The award was for the full balance due plus our legal and other costs.
2. We filed with the Sheriff to execute against the vehicle.
3. The Sheriff listed the vehicle for sale just like she would in a RE foreclosure. The difference is that all the HO protections on RE didn't stand in our way.
4. The HO paid the full amount of the judgment because he couldn't afford to be without his vehicle.

FYI

We have tried several ways to collect back dues in that we talk to people, try and arrange payment plans, waive late fees ,etc. but it gets to a point where they ignore us or do not honor their promises. We felt that by this time we had no "weight" with them so we needed an alternative with more teeth in it.

We use a real estate law firm that has a division within it that specializes in owner associations. They use a multi step process to collect. To the best of my recollection it works like this:

1. Our first attempts are to collect any owed money ourselves so after 30 and 60 days late, we send polite letters from the HOA even offering to make payment arrangements.

In the next quarterly bill, the HOA sends notice reminding the owner they are 90 days late and asks for back and present dues or a payment schedule acceptable to the HOA within 30 days or we will turn the account over to a law firm for collection. It is now almost 150 days since we have seen a payment. If no arrangements are made, we send it on to the law firm.

2. The law firm sends a letter informing the homeowner that they have received the case and are prepared to file a lien and commence to foreclose unless owed dues are paid and/or a payment schedule is arranged with the HOA within 30 days. The firm charges the HOA $65.00 for this letter.

The law/collection firm then backs off and awaits further notification from the BOD. It is now back in the BOD's lap. The BOD then tries once again to reach an agreement. In several cases the letter from the lawyers was enough for owners to make arrangements to pay. If no arrangements are made we turn it back over to the law/collection firm again. We control the timing of when we turn it back over to the law firm.

3. Law/collection firm sends a letter saying a lien has been filed (which it has) and foreclosure has commenced. It will now cost the homeowner $495.00 (to the law firm) plus owed dues to the HOA to stop the process. There is no charge to the HOA but the homeowner must pay the $495.00 to the law firm and back dues to the HOA to be current.

4. If no response within 60 days, the law/collection firm files some paperwork with the court about foreclosure and notifies the homeowner that foreclosure has begun and it will cost $995.00 (to the law firm) plus back dues to the HOA to stop the process.

5. The next step would be the HOA pays the law firm $400.00 and foreclosure commences. The process is completely stoppable at this point by the HOA, the HOA would still have a lien, and the law/collection firm is owed $995.00

We do not want to be in the real estate business and we have no desire to foreclose. I am not saying all should not foreclose but our decision is not to and as such, we have not gone past Step 3. I advise we never do.

Hope this helps.