Consistency in Collections
Much like paying taxes, no owner in a condominium or homeowners’ association enjoys paying assessments to their association. However, assessments are a critical part of maintaining the community for the benefit of all owners. For the community’s Board of Directors, it is important to handle collection matters in a consistent and fair manner amongst all owners. For most communities, it is also important to recover any legal costs incurred by the association during collection activity from the owner who is delinquent in the payment of assessments.
To properly collect delinquent assessments, it is advisable to consult with your association’s legal counsel and develop a standard collection policy. Any attempt to collect unpaid assessments is governed by multiple statutory restrictions and/or restrictions in the community governing documents, but it also leaves room for decision-making by the Board in some areas. Two examples are whether to pursue a lien against the owner’s property in the community as opposed to pursuing a claim for damages in the amount of unpaid assessments and related costs (or to do both), and whether to pursue collection at the minimum possible timeframe as opposed to allowing owners some additional time for payment. Whichever course is taken, it is important to be consistent and to update standard policies to reflect changes in the law. Beginning in 2021, both the Florida Condominium Act (in subsection 718.121(5)) and the Florida Homeowners’ Association Act (in subsection 720.3085(3)(d)) now require that a new thirty-day “Notice of Late Assessment” be delivered to the owner prior to the association having any right to require payment of attorney fees related to a past-due assessment. This new statutory notice should be sent prior to referral of any collection account to a law firm, or else the association’s attorneys’ fees will not be recoverable. A typical collection process involving a lien on the owner’s lot or condominium unit will involve one or more “friendly” reminders, followed by several notices that contain specified statutory timeframes and language: Notice of Late Assessment (thirty days), Intent to Lien Notice (forty-five days), Lien execution and recording, and Intent to Foreclose Notice (forty-five days). Sending the notices to the correct address(es) and in the proper manner is also critical.
While standard notice and demand procedures are important, the Board can also have flexibility when it comes time to commence formal legal action (i.e. filing a lawsuit for damages and/or lien foreclosure) or dealing with an owner who approaches the association wanting to settle a past-due account. In these situations, there can be many variables and a one-size-fits all approach may not always be appropriate. Mortgage foreclosures, bankruptcy, payment plan options, the owner’s form of ownership (personal names versus a company or corporation), and many other factors may need to be considered. Therefore, a good collection policy will standardize and formalize notice/demand procedures, while also leaving the Board room to make case-by-case decisions when appropriate. Robert Kauffman
Dunlap & Shipman, P.A.
Florida Supreme Court Certified Mediator – Circuit Civil