Have you ever had to foreclose on a neighbor? The word “foreclosure” strikes a note of fear and panic in most people. Typically, foreclosure is only considered when all other possibilities have been considered and no other solution can be found. It is the final remedy an association has to fix a problem that could otherwise financially cripple a financially sound community.
If you’ve ever seen the classic film, “It’s a Wonderful Life”, then you can easily picture the antagonist, Mr. Henry Potter (portrayed as the perfect villain by Lionel Barrymore). Mr. Potter was an evil banker, ready to foreclose with joy on any home owner who has fallen behind in his monthly payments. While most of us will find no enjoyment when the time comes to foreclose on a fellow unit owner, we would be well served to remove our compassion from the equation and appreciate the importance of this legal and business transaction for the necessity it has become.
The financial and legal obligations of the association are clear. Almost every association has rules and by-laws in place that describe a default by a unit owner to pay common fees and the actions that will be taken to collect any delinquent monies. The challenge for Board members, especially in smaller community associations, is that the foreclosure action isn’t against an unknown business entity. It involves the Board, representing the association, making a decision that will ultimately evict a neighbor. It is a human conflict of the highest order, the kind that can keep you awake at night if you allow it to.
In my experience, making policy is relatively simple compared to implementing policy. It is far easier to agree to foreclose on any unit owner who falls more than two months behind in their common fees than it is to watch a neighbor lose a job and struggle to make ends meet. It is not uncommon for people to live paycheck to paycheck. The topsy-turvy economy has created huge amounts of unemployment and underemployment in our region. All of us know someone who has lost their job. It is simply human to show empathy for our fellow human beings. It is even more so when it is someone close to us, like a neighbor.
My advice is to take a good look at your association’s collection policies. Delinquent collection of common fees is crippling many communities in our state. If you haven’t already done so, now would be a great time to consider alternative payment methods. For instance, my association began taking credit cards this past year, which helped a few owners get current. You may also need to review your collection procedures and make sure you are giving your association members every opportunity to keep current with their common fees.
When all else fails, foreclosure may be your final option. If you have been diligent in offering solutions along the way, you need not feel like Mr. Henry Potter when the time comes to foreclose. It is simply the final action the association needed to take so that all of the other residents who are paying their fees on time can enjoy their own “Wonderful Life”.
Bob Gourley is a condo and HOA industry veteran. He founded MyEZCondo in 2004 and produces the Ask Mister Condo website. He is also a partner in Association Life and HOALendingXchange. He is an active member of CAI and served as Chapter President for the Connecticut Chapter from 2010 – 2011.