Growing unpaid dues for community associations call for uniform collections policies

The collection of maintenance assessments from community owners is among the most fundamental aspects of community association operations. The viability of the community association model relies on owners paying their share of the costs incurred by associations to operate and maintain their community and preserve their property values.

Given the increased arrears that some South Florida communities are now starting to see as a result of rising insurance costs and inflationary economic pressures, boards of directors and property managers would be well advised to review and examine their collections policies to ensure that owners are properly reminded of their maintenance payment obligations. Without an effective collection strategy, associations may face serious and potentially disastrous financial consequences.

Boards of directors should look to Florida law and their community’s governing documents to determine if certain actions must be taken before a lien is recorded or a foreclosure action is initiated.

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Based on these reviews, a standardized written collections policy should be created to outline the steps and timing of notices to delinquent owners. The policy is also helpful to avoid the potential for claims of favoritism or selective enforcement.

When creating a collections policy, there is certain information that should be included. For example, owners should know the due date and to whom the payment must be delivered, the date that late charges will be imposed, the delinquent interest rate, and when a delinquent account will be turned over to a collection agency or attorney for handling. Associations should look to their declaration of covenants or bylaws to confirm if a late charge may be imposed, as Florida law only allows late charges if they are provided for in the governing documents.

The collection of a past-due account most often begins with an official written notice mailed to the delinquent owner. Both the Condominium Act and the Homeowners’ Association Act provide a mechanism for notifying owners of delinquencies known as the “Notice of Late Assessment,” which gives owners 30 days to make payment.

An association may not require a delinquent owner to pay attorney’s fees related to past-due assessments if it fails to deliver this notice. The notification must be sent by first-class mail to the owner at the last address reflected in its records, and it must include the name and mailing address of the owner, the property address, the account number, a breakdown of the amounts due, the default interest, and the name and address for payment.

For those delinquent owners whose parcels or units are rented, Florida law gives community associations the power to intercept rental payments from tenants leasing properties from owners who are delinquent in the payment of assessments. The law allows an association to demand tenants pay their rental payments to the association and continue to make the payments until their unit owner’s monetary obligations have been fulfilled.

Similar to the Notice of Late Assessment, the association must provide tenants written notice by hand delivery or first-class mail demanding they deliver their rental payments to the association. Tenants have complete immunity from any claims for rent by their landlord for payments delivered to the association.

For owners who continue to refuse to deliver payment after notices have been given, associations should consider the services of an experienced attorney or collection agency. These professionals prepare and send the required statutory notices to the delinquent owner advising of the association’s intent to record a claim of lien, and they notify an owner when a lien has been recorded against their property that could lead to foreclosure if the account is not settled.

Under certain circumstances such as cases of hardship, associations may be willing to forego the filing of a foreclosure action and entertain a proposal to have the delinquency paid over a reasonable period of time.

Ultimately, if payment is not made or an arrangement cannot be reached, an association may have its attorney file an action to foreclose the unpaid lien. While these professionals will require the payment of fees and costs to continue the collection process, much if not all of those added charges may be passed on to the delinquent owner.

Delinquency rates that can have severe financial ramifications are now on the rise at some South Florida enclaves. By developing a comprehensive written collections policy and deploying it with the help of qualified experts, communities can minimize their delinquencies and ensure all owners understand and meet their obligations.

Maryvel De Castro Valdes is a shareholder with the South Florida law firm of Siegfried Rivera who is based at the firm’s Coral Gables office. She focuses on community association law, real estate law and collections, and she is a frequent contributor to the firm’s association law blog at www.FloridaHOALawyerBlog.com. www.SiegfriedRivera.com, 305-442-3334, [email protected].