Articles Posted in Assessment Collection

By David Swedelson, California Condo and HOA Legal Expert and Community Association Attorney

I came across an interesting article from a law firm in Florida (by attorney Lisa Magill with Becker & Poliakoff) that addresses the fact that after a bank forecloses, many boards are writing off the debt without considering all of the association’s collection options.

Yes, it is true that trying to collect from some delinquent owners may be a waste of time. But a board should be cautious in making that assumption without knowing if the homeowner has or does not have money or other assets. Boards should consider evaluating collection options.
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Blog post by David C. Swedelson, Partner, SwedelsonGottlieb

How many times have you heard a delinquent condo or HOA homeowner (or their attorney) complain that the fees and costs of collection are almost as much as the amount of the unpaid assessments or fees they owe their community association? I am betting that you have heard this complaint before. But the fact that the collection and attorneys’ fees are not proportionate to the amount sought to be collected is not a defense that can legitimately be asserted by a delinquent owner. Had they timely paid their assessments or not let the collection action go on for so long, the fees would not have been that much. And what do they expect their association to do? Not seek collection?
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A Blog Report By Association Lien Services and SwedelsonGottlieb

Many of our clients have been asking for our forecast as to when their assessment collection nightmares are going to end. While we don’t have a crystal ball, we do monitor what the experts are saying. And this very question was addressed in an article in the March/April 2011 edition of CAI’s Common Ground magazine. The article, entitled “Foreclosures, Rocky Road” (and thus the motivation for this blog post) states what we all know, that “the housing crisis has been a turbulent ride.” The article went on to state that “as we enter year four, experts predict we may finally hit rock bottom. That would be welcome news for homeowners and associations alike.” The problem is that rock bottom is so far down, it is going to take years to get back to normal.
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By David Swedelson, Esq. and Alyssa Klausner, Esq.

It should be no surprise to anyone that the Great Recession has caused a significant amount of people to fall into serious debt, and many have filed bankruptcy. This is having a significant impact on many community associations’ efforts to collect delinquent assessments.

Just how big of an issue is bankruptcy in California? The Central District of California (CDC) is among the busiest bankruptcy courts in the U.S. The CDC serves over 18 million people in southern and central California, the largest federal judicial district by population. The CDC’s mission statement is “To provide, efficiently, justice to all parties affected by bankruptcy in the most populous and diverse district in the country.” A whopping 142,407 bankruptcy cases were filed in the CDC In 2010 (a 31% increase from 2009), greatly outnumbering the 14,330 bankruptcy cases filed in the Southern District of New York in 2010. The percentage of bankruptcy filings increased nationally by 13.8% from 2009-2010. It is no wonder we are seeing so many requests from our clients seeking assistance with a bankruptcy matter of a delinquent owner and to obtain relief from the bankruptcy automatic stay so that the collection process can continue, something we were rarely asked to do before the recession. Because the recession is not really over for California community associations, as there is still a significant amount of homes that are or will be in foreclosure for some time to come, it is important that board members and association management understand the basics of what bankruptcy is all about.
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What happens when owners do not pay their assessments, default and then allow their property to be lost through foreclosure? The answer is clear; their former association does not have enough money to pay the bills and/or the other owners must cover the deficit. This was the subject of an LA Times article that many of you might find interesting.

By David Swedelson, Esq. and Sandra Gottlieb, Esq.

As we near the end of 2010, we thought it timely and appropriate to provide you with a report as to the status of the assessment collection problems that continue to plague many California community associations as a result of the recession. The following information and opinions come from our perspective as experts in the field and as the operators of one of the leading assessment collection services in California.

We had hoped that we would have better news to report by now. We don’t! All of the reports we have seen indicate that our nation’s economy, while improving, is still a mess, and community associations (condominiums, planned developments and stock co-ops) are unfortunately suffering as a result. Unemployment remains high, creating an ongoing and significant problem. Recent government reports indicate that nationally, unemployment is now at 9.4% (increasing rather than decreasing).
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It is mid-October, and many California community associations and managers are busy working on their 2011 budgets that will need to be sent out by the end of November. In addition to the budget, however, there are several other documents and disclosures that are required by California statutes to be made on an annual basis. Most associations provide those documents and disclosures with the distribution of the association’s next year’s budget. As we have done every year for as far back as we can remember, SwedelsonGottlieb has published its Annual Disclosure Checklist for 2010–2011. If you are unable to download the PDF file utilizing the foregoing link, please contact Mark Petrie of our office.

You may also wish to download my recent article on Budgeting For Bad Debt.

By David Swedelson, Esq.; Senior Partner at SwedelsonGottlieb

This article follows an earlier post entitled To Foreclose Or Not To Foreclose; That Seems To Be The Question. We had hoped that the economy would have improved so we would not have to revisit the issue. However, board members and managers are still asking the question: Do we foreclose or not? This question is coming up more and more as banks continue to delay foreclosing themselves as they do not want to take title to the property, adding it to unsold inventory and picking up responsibility for its maintenance and the association’s assessments and fees.

The answer to the question is that boards need to seriously consider foreclosing on the assessment liens recorded against the properties of non-paying owners in order to protect the community association – and to protect the other owners who are paying their assessments. Associations need and rely upon the timely payment of assessments to pay the bills, and to maintain the common areas and other amenities. If one owner doesn’t pay, the other owners have to pay and in some instances pay more. Desperate times often require desperate measures, and it may be necessary to force the hand of a non-paying owner (and subsequently the bank) by foreclosing. The ultimate goal by foreclosing is to get a property owner who will pay the assessments; in our experience, the quickest and most efficient way to accomplish this goal is through non-judicial foreclosure.
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A recent column in the Los Angeles Times addressed an interesting issue regarding assessment collection on units or lots owned by soldiers who are serving in Iraq, Afghanistan or elsewhere.

The article referenced a community association in Texas that proceeded to foreclose on its lien recorded against a home owned by a soldier that was on active duty in Iraq. As the article indicates, while the soldier was in Iraq, his wife was in the home but “suffered from anxiety and depression over her husband’s tour of duty, didn’t open the certified letters informing her that the $315,000 home in Frisco, Texas was about to be sold to collect $977.55 in back dues [assessments] (although by the time the home went to auction, legal costs had ballooned the amount to about $2,600).”

The house was sold in a foreclosure sale, the buyer sold it to an investor, a lawsuit ensued and eventually the parties settled.