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Adopt a Clear Policy on Dues Collection in the HOA or Condo Association


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Assessments are the lifeblood of the HOA and Condominium Associations. However, only in very few condominium associations is the collection of dues a process of laissez faire. Most condo associations need to have a consistent process and procedure to thrive and not merely survive.

This article is concerned not only with the process of collection of dues, but also the philosophy of the collection of assessments adopted by an Association.

Philosophy Collections

If they realize it or not, all associations need to adopt a philosophy of collection. Some do it without realizing it and without realizing what they have adopted, while others deliberately and consciously adopt a philosophy that conforms to its members and the community in which we all live. Eeach association should review periodically their philosophy of  collection.

One way is by developing a mission style statement. A mission statement sample of the collection of fees from a condominium association could look like this:

1. We want to collect almost 100% of the assessments in the most humane way possible.

2. We believe in constant communication with co-owners, as the cornerstone of an effective collection policy.

3. The collection process should impose graduated sanctions for untimely payments.

4. The extraction procedure should be clearly and frequently communicated to all co-owners before default.

5. The collection procedure must be in writing and part of the condominium’s governing documents.

6. The collection procedure should be applied in a consistent and uniform.

7. Owners should be treated with respect throughout the collection process.

This “mission” is for illustration only and not to promote a particular philosophy. But it is important for the association to see itself and its members and put some thought into a mission statement or philosophy that suits both its members and will result in effective collection of assessments.

The centerpiece of an effective evaluation process is an administrative decision establishing the policy of the association in the collection of arrears. Thry are promulgated by the Board of Directors  to all joint owners and sometimes they are an administrative decision based on the rules of the Condominium Association and the Regulations. In any case, it is the written statement by the association of the practice of collecting the assessments. His goal is simple: to collect all assessment due..

Since the resolutions of assessment will be different according to the policies of associations, there is no resolution of a universal nature. A resolution of the generic assessment may provide the following:

1. Assessments are due on the first day of the month.

2. After a grace period of 10 days, late fees apply.

3. A Notice of Intent to Lien is sent to the owners if more than 30 days late.

4. A condominium lien is recorded against any unit owner of more than 45 days late.

5. The acceleration of all collections at the end of fiscal year (if allowed in the condo documents) to the delinquency of more than 3 months.

6. After the commencement of the foreclosure action, however, all payment plans or agreements require board approval.

The most important thing is that the resolutions are recorded, enacted by the Board, distributed to all owners, and most importantly, timely and consistently enforced.

MECHANICAL ENFORECMENT

Notice of Intent to Levy.

The Notice of Intent to Levy is normally sent to the delinquent owner by the management company or, if the association is self-management by the Association Treasurer. Serves as a warning about the imminence of lien filing.

Lien recording.

The registration of a lien against the condominium unit is the most important action that the association may have. Guaranteeing the payment of delinquent assessments and acts as a “wakeup call” for the delinquent owner. Because the Condominium Act sets forth strict and explicit requirements of a valid condominium assessment, preparation, recording and service of the garment is best handled by an attorney for the association.

The condo association and / or their management companies can facilitate the process of preparation for freezing, ensuring that the record of each unit owner to contain certain essential information, namely: (1) Unit number, (2) Copies of all writing to the owner, (3) E-mail to the owner of the house (especially if the owner occupiers), (4) tax identification number of the unit, and preferably (5) a account ledger that clearly reflects assessments, late fees and legal expenses separately.Once prepared by the attorney for the association, the lien must be timely recorded with the county recorder  and presented to the owner.

Acceleration of the evaluations.

Some but not all condominium documents provide the association the right to accelerate the balance of the fiscal year’s quota in the case of default. When the documents do not so provide, the association must consider how best to exercise this power. If the collection process is designed to penalize the increase in delinquencies, severity of the acceleration of the evaluation must be weighed in the decision of its time.

The exemption from taxation of the condominium.

The most difficult decision made by a board of the association to have an attorney to bring an action for foreclosure on the lien of the condominium. Some associations prefer to wait until a certain minimum dollar amount of delinquency has been exceeded. This approach can create problems, especially when special payments have been accepted.

The association also must decide whether to foreclose on the lien or condo to sue for damages only in the district court. Execution can be done either by advertising or by judicial foreclosure. The choice of proper enforcement mechanism requires a detailed analysis of the factual circumstances and is best left to the discretion of an attorney for the association.

Each process has its advantages and disadvantages. Foreclosure by advertising is relatively cheap, but does not allow the association to pursue the co-owner for damages if there is insufficient equity in the condominium unit to recover any money from the foreclosure sale. A district courts issuance of damages is faster than the circuit court action, but this trial is as good as the ability to collect from the delinquent owner, and this trial may be overridden by a bankruptcy. Judicial foreclosure offers maximum flexibility and protection to the association, but it requires a trial in circuit court, is costly and time consuming.

Redemption period.

Assuming overbids, a foreclosure sale deed produce Foreclosure secretary, who must be registered in the register of deeds office, reflecting the property of the Association of foreclosure unit, subject to the first mortgage and subject to the owner’s right of redemption, which is usually six months. During the redemption period, the Association and their advisors often need to control for any foreclosure proceedings by the mortgagee in the first place. Normally, if the financial circumstances cause an owner to become unable to pay the fees, and ultimately, failure of the first mortgage and the mortgagee will continue the foreclosure by advertisement. Often, there is only a relatively short “time window” in which the Association shall have the lead, the property before the sale of the first mortgage, and the Association must take aggressive steps to market to recoup its investment nit .

CONCLUSION

The enactment of a general administrative decision procedure for  the collection of assessments is the best hope for a condominium association or HOA to minimize uncollected assessments.

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