If you have purchased a condominium or property in an HOA you have signed a rider. For condos its called a Condo Rider. For HOAs its Called a PUD Rider. This rider is an attachment to the document recorded in the land records to secure the note given by the lender (aka mortgage). These riders are a path to collect delinquent HOA and Condo Fees.
Banks Have a Stake in Assessments Being Paid
One of the most important items contained in the Rider deals with maintenance fees. It is very important to the lenders that these fees are current. The mortgage company has an interest in the property. The mortgage company wants you to pay taxes and insurance and they want you to pay your maintenance fees. It is especially important to them if the unit has equity. That is because the community association has the right to foreclose.
If you do not pay these your maintenance fees, the lender may pay them. Any amounts that it pays on your behalf will added on to the loan amount with interest.
To protect their interest banks want to know when a unit is delinquent in its payment of fees.
As a Stakeholder, the Bank May Opt to Pay Delinquent Fees
In the Condominium Rider/PUD Rider, you agree to conform to the condominium or HOA rules. Especially paying your maintenance fees. Failure to do so puts them in a difficult position. Lenders want to know if an owner is not paying maintenance fees. If you do not pay these your maintenance fees, the lender may pay them. Any amounts that it pays on your behalf will added on to the loan amount with interest.
Here is a direct quote from one such rider:
“If Borrower does not pay condominium dues and assessments when due, then Lender may pay them. Any amounts disbursed by Lender under this paragraph F shall become additional debt of Borrower secured by the Security Instrument. Unless Borrower and Lender agree to other terms of payment, these amounts shall bear interest from the date of disbursement at the Note rate and shall be payable, with interest, upon notice from Lender to Borrower requesting payment.”
Is Your Attorney Contacting the Mortgagor When Delinquent Accounts Are Turned Over?
When a unit owner becomes delinquent this is a method to recover those funds. Your collection solutions should be reporting these HOA delinquencies to the lenders. It is very rare that a community association attorney will do this.
Community Association attorneys will send a notice of intent to file a lien. Then they will record a lien. Then they may or not foreclose on the unit. That is a “legal process” not a “collections process.” The object is to recover delinquent HOA and Condo fees.”
Lenders Have A Path for Associations to Collect Maintenance Fees
An effective collections solution will contact all stakeholders to resolve the delinquency. If the owner pays that is great. If there is a possibility that the lender will pay that is good too. The lenders have provided a path for associations to collect their maintenance fees. That is an opportunity that is too good to pass up. Its easy simple and elegant. It is also effective nowadays that units have equity in them. Use the rights given to the association by the Riders to Collect Delinquent HOA Fees
When a unit owner becomes delinquent this is a method to recover those funds. Your collection solutions should be reporting these HOA delinquencies to the lenders.
The banks want to protect their interests. If your attorney is not contacting the lender, they are not doing their job. If you hired an attorney to collect then they should try every option available to them.
Litigation Should Be a Last Resort
Foreclosure should be the last resort. To collect from delinquent owners you need to engage them. If that does no good, engage their lender. Collection agencies eager to collect will knock on every door before they litigate.
Take advantage of the resources that exist before you foreclose.
PUD and Condo Riders are there for a reason. Why not take advantage of the resources that exist before you foreclose. There are many paths to take to recover delinquent assessment fees. The best course of action is to hire a specialist to take on this task.
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.