Avoiding collections and getting out of a jam once in collections.
What to Do?
A large majority of my practice involves clients who hire me to help them resolve their issues with past due assessments. Most people do not realize you cannot withhold assessments for any reason, including financial hardship, divorce, death or being dissatisfied with the way the association is being managed. Once an owner is past due in assessments, the debt snowballs into an amount which is difficult to pay and trying to get a payoff amount is a moving target with each phone call or email increasing the balance. This is because state law favors the association and makes the owner responsible for all legal fees and costs to collect past due assessments. It is a necessary evil.
So what do you do? Simple answer: pay your assessments in advance. Pay them at least two installments in advance and check your account with the association on a regular basis to make sure you are current. Most management companies now have online access for owners to check their balances.
Do not use an automatic draft from the management company which takes your money out of your account for you. Use the bill paying services your bank offers to send money to creditors so you are in control of the funds. At least one management company I will not name has expiration dates on the automatic draft documents they use and the automatic draft stops after one year, requiring the owner to renew it. If the owner is not paying attention to the email notices advising them it is time to renew, the automatic drafts stop and the owner is quickly in collections.
If you mail in your payment, you run the risk of the mail not being delivered or management losing your payment, which the management company will deny. It is the owner's responsibility to make sure payment is delivered. This would mean sending it by certified mail to track delivery, which can be expensive. If you pay in person make sure you get a receipt.
What Not to Do
What you should not do? Here's a list:
1. Do not withhold payment because you did not receive a notice or a coupon. You purchased property in a community with an association and the law states that is your notice of a duty to pay assessments. If you do not know the amount of the assessment, contact the management company or the board of directors and find out. At the very least pay the amount of the last assessment, but be aware you will still incur interest and late fees if the full amount is not paid.
2. Do not try to pay the assessment only once it is past due. Any payments are applied to interest and late fees first, attorneys' fees and costs next, with any leftover funds applied to assessments. You will always be past due in assessments if you do not remit the full amount.
3. Do not try to avoid attorneys' fees by paying the association directly. This will only increase your legal fees and delay posting the amount to your account because the association will send your payment to the attorney. You are then billed by the attorney for processing partial payments. Once you are in collections, deal with the attorney directly.
4. Do not call, write or email the attorney thinking you will increase legal fees for the association as a way to get even. State law makes the owner liable for these communications. You are increasing your own legal fees, not the association's.
What if it's too late?
What should you do if your in collections already? Submit in writing, a request for a payment plan if you cannot afford to pay the amount in full. The average payment plan is six months to a year, so do not ask for long-term payment plans. Some associations will approve 18 months, but it's not the norm. Be prepared to pay the legal fees for preparing the plan and for processing the payments. If you cannot afford the payment plan, consult with a lawyer to advise you of your options, but do not ignore the collection letters. An association can foreclose on your property much faster than a bank.
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