The authority to levy and collect assessments is found in the Declaration/CC&Rs of community associations. However, there aren’t typically specific procedures to follow if an owner is delinquent in the payment of assessments. Most condominium and homeowner associations adopt a separate resolution or policy which governs how the association will handle collecting from delinquent owners. Here are a few things to consider when adopting a collections policy:
1. State the authority for collecting assessments
The policy should begin by citing to the appropriate authority to file liens, charge late fees and interest, and turn the account over to an attorney for collections. The governing documents will contain the obligation for all owners to pay regular assessments. The authority to charge late fees or interest (sometimes the amount is left open for the board to decide) will also be in the association’s governing documents. In addition, cite to the appropriate state law which grants community associations the power to collect assessments, fines, late fees or interest.
2. Define the process
Most collections policies include the following steps:
a. Initial letter indicating delinquency and the amount of any late fees or interest
After 30 days from the due date, the Association will provide notice to the delinquent owner stating that a late fee and interest have accrued. The notice shall state that if the balance is not paid, the account will be turned over to a law firm for collections.
Any assessment which becomes delinquent will be charged a late fee in an amount equal to 5% of the unpaid assessment. In addition, the assessment will accrue interest at the rate of 9%.
b. Lien filed on lot or unit
c. Second demand letter stating that the file will be turned over for collections
Any assessment including late fees unpaid and past due for more than 60 days will be referred by the Board of Directors to its law firm for collection.
d. Provisions to comply with the Federal Fair Debt Collections Practices Act
e. The type of garnishment tools which will be used once a judgment is entered against the owner.
After CALAW obtains a judgment, it will begin collection of the judgment by:
garnishing the owner's bank account; or
garnishing the owner's wages; or
executing a writ against the owner's real or personal property; or
any additional methods authorized by law.
3. Publicize the policy
The association will have a difficult time enforcing its policies if those policies aren’t publicized and distributed to owners. This puts owners on notice of the steps that will be followed for the collection of delinquent assessments. Keep in mind that when new owners move to the community, copies of all resolutions, policies or other unrecorded documents need to be provided.
4. Enforce the policy consistently
Once the board of director adopts a collections policy it must follow the steps outlined in each and every circumstances. Special arrangements or exceptions are not appropriate. The exact same procedures must be followed in each case. If not, owners may challenge the application and enforcement as selective or unfair.