Donâ€™t Throw Good Money After Bad!
Atlanta,GAâ€“Our countryâ€™s recession has affected all aspects of life in our country, and homeowner associations have taken the brunt of some of the worst of it. The majority of associations throughout the country are now having to deal with increases in past-due assessments, foreclosures, bankruptcies, and short sales. Homes are losing equity, banks are afraid to lend, and owners find themselves having to pick and choose which bills they will pay, as the threat of losing their houses looms over them. The refinancing options-once homeowners saving grace-are no longer available to these struggling home owners. These factors all lead up to the obvious result of nonpayment of assessments, leading to foreclosures and bankruptcies; this contributes to suffering association budgets. On top of these difficulties, many associations are dealing with costs for construction defect litigation and repairs on thirty-some year-old buildings, which often equal large special assessments.
Everyone in the industry is sharing in the pain of the associations. Managers and association relationships are being strained as managers scramble to come up with quick solutions to enduring problems. Boards get easily upset with managers as they are now paying more attention to accounts receivable and budgets. Both the board and managers want their attorneys to be able to collect faster than they are doing. Meanwhile, attorneys are trying to satisfy all of their clients, while seeing a dramatic increase in collection activity.
We are all, essentially, trying to milk a dry cow. There are situations where there is no money to be collected. However, if associations act quickly and creatively, they place themselves in a situation where there is the hope that money will be collected at some point, allowing associations to get their accounts receivables current.
It is important for attorneys to explain the collection process to both the board and managers. Managers need to realize that, with this economy, boards cannot count on all the debt to be collected. Managers need to set realistic time-lines and help boards come up with manageable budgets, while factoring in bad debt. It is time to start thinking creatively. The proven method of demand letters and liens are not as effective as they used to be. There are things that both boards and managers can do to help prevent a bad situation from turning worse.