Assessment Collection

Assessment Collection Presented by Lella Amiss “Ami” E. Pape

Assessment Collection • How to increase your success at collection • How to limit your inability to recover • What are routine collection procedures

Increasing your Success • Starts with a working knowledge of your documents • Are you a HOA, POA or COA? • Collect EVERYTHING due you • Start the collection process early, rather than later • Be aware of and act on time deadlines

“The Finer Points of Collecting Assessments” • When should we demand payment in full? When should we settle? • Factors to consider: • the “20% rule” alive [and despised] in Fairfax Courts • Legal Cost and fees of post-judgment collection are NOT recoverable.

WHEN TO COLLECT • Considerdebtor’s payment history • Consider other personal factors • Recent unemployment • Recent heath issues

The Demand Process

What is the Attorneys next step? • We MUST abide by federal law, FDCPA • Prohibits communication with persons other than the debtor • We have to allow 30 days to pass after the initial communication • Part of our due diligence is to determine the following when an accounts is turned over:

What is the Attorneys next step? • Who owns the lot? We can only issue a demand to the lot owner • Did they own it during the applicable period • Are the assessment correctly assessed • Correct day, correct amount? • Are late fees permitted?

THE PROBLEM WITH LATE FEES • JUDGES ARE VERY PARTICULAR • Must Be Specifically Permitted Under Your Declaration/Bylaws (HOA) Or Bylaws (Condo) • Must Be Assessed On The Correct Date • Must Be In The Correct Amount With Supporting Documents If There Is A Change From What The Documents In Land Records State.

LATE FEES • Application must be uniform • Double check your management company. • Are they haphazardly assessing late fees? • If your association is due it, are you leaving it out, and forgoing income to the association?

SETTLEMENT? • To Reach A Settlement, Late Fees Should Be The First Thing A Board Is Willing To Waive, Simply Because It Is Taxable Income To The Association.

LIEN STAGE • ALWAYS, ALWAYS, ALWAYS SECURE A LIEN • Unauthorized Practice Of Law To Have Your Management Company Prepare And Record The Liens • Be Aware Of Your Lien Deadlines

LIENS • CONDO- 90 DAYS OF ASSESSMENTS UNDER THE VIRGINIA CONDOMINIUM ACT • DECLARATION (INCHOATE LIEN) DEPENDS ON YOUR GOVERNING DOCUMENTS • HOA/POA- TWELVE MONTH OF ASSESSMENTS • LIENS VIRTUALLY ENSURE YOU WILL BE PAID* (THERE IS ALWAYS SOME FINE PRINT) OR AT LEAST INCREASE THE ODDS OF PAYMENT!

Post Lien • THE NEXT STEP • Obtain the personal judgment by court action

PERSONAL JUDGMENTS • LET THE ATTORNEYS DO THIS • It Is Expensive • It Is A Charge To The Debtor • And There’s The 20 % Rule

Advantages: • Secures The Debt Personally • Can Only Be Avoided In Bankruptcy. • When docketed in a county, it attaches to ALL real property owned by the debtor found in that county, not just the unit/lot in your cluster

POST JUDGMENT COLLECTION • Variety of means: • bank, wage, and tenant garnishments; • levies ( think cars and boats) • Threat of attachment of assets and/or property could encourage further payment

Disadvantages: • Legal fees incurred in post-judgment collection cannot be recovered • Difficult beforehand to know whether it will be successful • Monies collected can be applied only to outstanding judgment

WHAT ABOUT NON-JUDICIAL FORECLOSURE?

Advantages: • Much less expensive than judicial foreclosure • Much faster than judicial foreclosure (approximately 6 weeks to 4 months) • Encourages debtor to pay the entire debt, or at least agree to a very aggressive payment plan • Gives Association means of dealing with the “long-term debtor”

Disadvantages: • More expensive than other means of collection ($2,000 - $4,000) • If property goes to a lender foreclosure sale, we cannot collect the debt unless there are ‘excess proceeds’

Problems with title • Who owned it when • What about foreclosure • What about bankruptcy • What about divorce • What about death • What about Servicemans Civil Relief Act of 2004

Formally the Soldier’s and Sailor’s Relief Act, now the Servicemans Relief Act of 2004 • who: active military and dependants (spouse) • Military includes hospital staff, Coast Guard, and many other categories, such as reservist called up for active duty • what: grants a stay in civil proceedings if military service has materially affected ability to (1) protect rights and (2) meet financial obligations • does not relieve anyone of a just debt

What adjustments should be made in our collection process in light of recent events? • Increase in foreclosures • Leveling property values • Non resident owners • Requesting that they contact management if they are active military

CRITICAL – ADDITION TO ALL COLLECTION NOTICES YOU SEND • Also add language to late notice/ any notice regarding the debt that once an account is sent to the attorneys for collections, monthly statements do not include all fees and costs due.

Secure The Debt, • But Do Not Pursue Too Aggressively • [don’t become the latest Metro Section report!]

Be willing in all cases to waive what you can waive to obtain payment: The Board can usually forgive all or part of : • Late fees • Accrued interest • Management turnover fees

Questions?

Assessment Collection