As volunteer Board Members for your Association, we realize many of you have never dealt with analyzing financial reports, collecting money owed, following guidelines set forth in governing documents, or any of the numerous other duties and tasks Board Members are called upon to complete. And, we also realize that a very important part of what you do as Board Members is overseeing the collection of assessments.
Because the collection of assessments is so important to an Association, it is the subject of many questions from Board Members. Therefore, we have compiled a list of the most frequently asked questions regarding collections.
Our number one frequently asked question has been, can the Association publish a list of delinquent owners? Our attorneys advise clients that it is not a best practice to publish a list of delinquent owners. Although Associations generally do not fall under the requirements of the federal Fair Debt Collection Practices Act (FDCPA), they suggest to Board Members that it is better to act in a manner that protects an owner’s privacy rights and not publish a list of delinquent owners. Any errors in public reporting can be the basis for a defamation lawsuit.
Another common question we receive is, can a delinquent owner vote? The answer to this question is that it depends on what your Association’s governing documents say. Voting rights for delinquent owners can only be suspended if your governing documents state this. If your governing documents do not mention banning voting rights for delinquent owners, the Board may create a rule that bans delinquent owners from voting provided that it falls within your rule guidelines. This rule must then be distributed to all owners, and you should notify an owner in advance of an annual meeting if they are not permitted to vote.
We are also often asked, can we shut off water or other utilities for a delinquent owner? This question has the same answer as the question about a delinquent owner voting. If your Association’s governing documents state that the Association can cut off utilities to a delinquent owner, then it may be allowed. If your documents are silent regarding cutting off utilities for a delinquent owner, please contact our office so we may further assist you in this matter, as an Amendment to your documents may be necessary.
A more specific procedural question that Board Members frequently ask about is, when do you recommend filing a small claims complaint versus filing a foreclosure complaint? The answer to this question depends on many different factors. The two most important factors are the balance owed and owner characteristics.
The balance owed on the account must be under $3,000.00 to file a small claims complaint. The rules of small claims court cap the amount that can be recovered in small claims court at $3,000.00. If a delinquent owner’s balance is over this amount, we would have to consider action other than small claims.
The second factor we would consider is the characteristics of the owner of the property. If the property is owned by a corporation or a trust, and not owned personally by an individual, our attorneys generally lean toward recommending filing a foreclosure against this property. Small claims court would merely provide a personal judgment against the owner. This type of judgment is generally not permissible against the owner of a corporation or the trustee of a trust. Another factor regarding ownership that we would consider is if the owner is located in Ohio or out of state. If an owner is out of state, that would make it more likely that we would consider filing a foreclosure instead of a small claims.
Board Members regularly ask us about filing liens, also. Usually a Board Member will call or email and ask: We have delinquent owners that just put a “For Sale” sign up their yard, how do we put a lien on the property as soon as possible? If these owners have never been contacted by our office, it will take at least 30 days to place a lien on the property. In order to place a lien on the property, the owners have to be given a notice of the amount owed on the property and given 30 days to contact our office regarding the debt. This notice must be given in compliance with the FDCPA. If the owners do not contact our office, we would then prepare the lien after the 30 days have passed.
This is a very small sample of a few questions we frequently receive. We receive questions daily from Board Members regarding all different types of collection matters. We welcome your questions. Please contact us any time with your collections questions.