Not all HOA & Condo delinquencies are created equal and each one has it’s unique circumstances. However, in most cases the delinquent owners can all fall in to one of three categories: The Needy, The Greedy, and The Seedy. The only question remains is: How do we handle these HOA & Condo Collections?
The Needy member of an association may have fallen into bad circumstances either due to unforeseen financial events, unfortunate circumstances, or even by circumstances that often happen at community associations. People lose their jobs and sources of income or have their investments go bad due to no fault of their own, their family economy suffers a loss and their income is not adequate for them to pay all their bills, and one of those obligations may be their maintenance fees for their condo or HOA. In some cases, unforeseen events such as a health emergency can knock their budgets off their rails and cause these owners to make some hard choices as to who gets paid and who does not. Then there are community associations who run into an unexpected capital expenditure expense that were not contemplated in the reserves and when this happens that triggers a special assessment. These members purchased their property with nothing but good intentions and even made adequate plans for most eventualities, but in life bad things can happen to good people, and that triggers an HOA & Condo Collections event. The goal is to manage this event and not have it turned into a prolonged expensive tragedy.
Once you have engaged an attorney the costs and fees can be so prohibitive that getting out from under this situation is impossible and the board will eventually have to make the unhappy decision to foreclose on a person or family who could have worked things out
What can be done to help people who have fallen into these hard times and have good intentions. Should your community association engage an attorney and foreclose on their unit? Should they sell their property and leave their homes? Or is there a better way to work with members of an association to resolve the issue without Draconian actions being taken? Once you have engaged an attorney the costs and fees can be so prohibitive that getting out from under this situation is impossible and the board will eventually have to make the unhappy decision to foreclose on a person or family who could have worked things out. That is why community associations need to know and understand all the options available to them regarding HOA & Condo Collections to make a sensible, compassionate, and smart business decision. Maybe by engaging a collection agency who is trained to work out financial payment plans at minimum costs could be the best way to bring these types of cases to happy resolutions. Once you engage a “legal process” the most likely resolution is hardship both for the delinquent owner and the community association. Consider a “collections process” where the goal is to get a delinquent owner to pay what is owed and not a “legal process” where the matter is brought into litigation.
So, who are “The Greedy,” and how do we resolve their delinquency issues? In many cases there are people in community associations who habitually pay the community association late or just plain stop paying altogether. They have the money but they rather it remains in their bank accounts instead of paying their obligations. Perhaps they feel that the community association is not providing them with the services and amenities that they expect and feel justified in holding back on what they owe. This is never a good excuse for non-payment, but it happens every day. Many owners in community associations confuse maintenance fees with rent and if they are not happy they put the onus on their neighbors because there is NO landlord. A renter has the legal right to withhold payment to a landlord for poor conditions, but a member of a community association never has this option. Or it is sometimes the case that an owner does not pay their rightful share and there are no circumstances. Nothing happens and that only encourages continued bad behavior.
By respectfully explaining to a delinquent owner that their condo or HOA maintenance fee obligation is just as important as other consumer debt obligations a collection agency can resolve the issue quickly
So how do you manage “The Greedy?” Well, if an owner has the money to pay the association needs to do is establish consequences for continued non-payment and open a serious line of communication. Once again, an attorney can be engaged to pursue litigation but that’s an expensive and adversarial solution that can be avoided. This type of delinquency is best managed by a collection agency who has the resources to send certified initial demand letters, perform skip traces to locate the delinquent owner, make outbound calls to engage them, send demand letters to their mortgage holders, cause liens to be filed, and report them to credit bureaus. By respectfully explaining to a delinquent owner that their condo or HOA maintenance fee obligation is just as important as other consumer debt obligations a collection agency can resolve the issue quickly. This is done by having the ability to report a delinquent owner to a credit bureau which only an HOA & Condo collections agency can do. It is very rare that community association attorneys will report a delinquent owner to a credit bureau or even make an outbound call. Engaging and educating “The Greedy” owner is the best course of action that an association can take to resolve the delinquency quickly.
So that leaves us with “The Seedy.” Now, it may see harsh to call a person “seedy,” but an Individual who abuses community associations for profit by renting units that they own but do not live in, and don’t pay their maintenance fees clearly deserve that moniker. These people are concerned with the returns on their investments more than they are with your community and they expect the good paying owners to maintain their property. Those who see your community as solely a business opportunity should be dealt with and sent into HOA & Condo Collections. If your community association has such an owner, then there are lots of options. If they are in Florida a good collection agency will send the owner and their tenant a rental demand letter. State statutes in Florida allow community associations to step into the shoes of an owner/landlord and intercept the rent from the renters. If the tenants do not pay the rent to the association or its assigned collection agent, they are subject to eviction. The owners of these units should be reported to credit bureaus, and have liens placed on their property. Finally, the board should resolve to refuse the owner and renter of a unit that has not paid maintenance fees for 90 days use of the association’s amenities and suspend voting privileges.
Community associations have options regarding the recovery of money owed to them. The decision to act should be swift and the actions taken should be considered carefully with the goal of getting a unit owner to pay their obligations. HOA & Condo Collections are not complicated but they do require attention. There are times when it makes sense to spend money on legal fees and costs, but it is not the only choice that condos and HOAs have. Consider all your options and act in the best interest of your community…consider a merit based solution that has its interest aligned with your community.
Contact: Mitch Drimmer
Mitch Drimmer is a respected thought leader in his field and has led numerous continuing education classes in collections, His articles have been published in key trade journals and newspapers, and he is a speaker at educational seminars. Drimmer is also a former board member of the Florida Community Association Professionals (FCAP) and earned his company the distinguished FCAP Reader’s Choice Award for collections four years in a row. Throughout his career, Drimmer has worked with community associations to help them see their way through tough times, especially during the real estate crash. He is a passionate advocate for community associations and has participated in the legislative process over the years trying to bring fair and equitable legislation that serves community associations.
Drimmer earned a BA in History from Hunter College and served as CEO of Drimmer Industries, Inc. in New York City for 35 years.