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Easy Steps to Getting Paid in a Difficult Economy

Lerch, Early & Brewer's Legal Update

Practical Considerations for Community Association Collections

In today’s economy, community associations need to be strategic about collecting delinquent assessments and other monies owed. They must be proactive and aggressive. Below are practical strategies for community associations that can make the difference between getting paid or not.

Play Detective

Even before owners become delinquent, the community association should collect as much information as possible about owners and their tenants in accordance with applicable privacy provisions.

Key information to gather includes:

  • Mailing Addresses–These are important for sending notices and serving owners with court documents, if necessary in the future.
  • Banking Information–Having this information can help the association collect on a future judgment by garnishing the owner’s bank account.
  • Employment Information–Similar to banking information, it can be easier to collect on a judgment in the future if one is able to garnish wages.
  • Copy of Lease–If it is a rented unit, having this information may assist in allowing the association to garnish rent.

Applications for pool passes or recreational passes are great opportunities to collect both mailing addresses and employment information. Surprisingly, collecting banking information can be much easier than one might think. Simply make copies of checks and other payments made by the owners and keep them in each owner’s file. Because most payments are made by check, the association already will have the name of the bank, the account number and the routing number on file in case they are needed later to garnish the delinquent owner’s bank account. Additionally, if owners pay by direct debit, associations already have this information at their fingertips.

Start Early and Be Aggressive

The association should start collection efforts as soon as an owner falls delinquent. The old mantra, “the squeaky wheel gets the grease” holds true here. Do not let owners believe the association will be lenient. In this economy, owners have limited funds, and if the association does not act quickly, it may lose its chance to be paid. The chances are that the association is not the owner’s only creditor. If the association is aggressive (sending out delinquency letters, approaching the owner, etc.), the owner is more likely to pay the association before paying the creditor that has not yet contacted him or her.

But Be More Lenient in Accepting Payment Plans

Gone are the days when community associations could limit themselves to payment plans that paid the total delinquency quickly (usually less than six months). It is in an association’s best interest to be lenient, review each delinquent account on a case-by-case basis and look at factors such as the owner’s good faith effort and ability to pay. Entering into a one, two or even three year payment plan with a willing owner potentially may be the only way an association will receive any money in the short term.

Nonetheless, all settlement agreements must be in writing. It is also in the association’s best interest to work with an attorney to ensure that it has legally protected and secured itself. Promissory Notes and Consent Judgment Agreements should be drafted and signed by both sides. Although both sides should be willing to negotiate, the association should not leave itself vulnerable by just “shaking on it.”

Suspend Owner’s Privileges

It is surprising how much owners value the ability to use the swimming pool. To the extent that associations are permitted (consult an attorney and the association’s governing documents), suspending an owner’s right to use the pool can be a deterrent enough to convince the owner to pay. When all of the neighbors are using the pool on a warm summer day, the delinquent owner will want to join in. Suspending privileges also can be used for suspending an owner’s right to use a parking space, club house or other amenity.

Consult an Attorney Early to Discuss Strategy

Using these practical tips in conjunction with other legal tools will put the association in the optimum position during these tough times. The association’s best protection is to secure an owner’s obligation with both a lien and judgment, because both are enforceable for 12 years. This will ensure that even if the association cannot collect money today, it can do so when the owners get back on their feet.

Ruth Katz's experience encompasses a variety of litigation matters faced by condominiums, cooperatives and homeowners associations, especially in the area of collections and the levying of fines. For more information about collecting delinquent assessments, contact Ruth at rokatz@lerchearly.com or (301) 657-0188.

This content is for your information only and is not intended to constitute legal advice. Please consult your attorney before acting on any information contained here.

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