By Heather L. Hartung, White Bear Ankele Tanaka & Waldron
You have heard the saying that April showers bring May flowers, but have you thought that possibly pool keys cure delinquencies? Thinking outside the box is key to a successful collection effort on behalf of an association as following the standard collection process is not always the most expeditious way to collect.
The “standard” collection process starts with the association or management company sending the required reminder and warning letters noted within the collection policy and providing delinquent owners who qualify with an opportunity to enter into a six month payment plan. When these letters are ignored, and let’s face it most are likely thrown in the trash, the file is turned over to legal counsel. At this point, the standard process is for the law firm to send a demand letter and when a response is not received the next step is a personal lawsuit. None of these actions typically catch the owner’s attention. There likely is not a reaction until the owner is served with a lawsuit and then that reaction seems to occur at 4:55pm the day before the scheduled return date at court.
Is it possible to catch a delinquent owner’s attention earlier in this process? In some instances, yes. This brings us back to pool keys and delinquencies. If an association’s governing documents provide that access to amenities, such as the community pool, may be withheld when an owner is delinquent USE IT. Withholding pool privileges September to April will not have much of an impact, but notifying owners a month or so before the pool season or cutting off pool privileges during the pool season will likely result in a response. At this point, the association can, depending on the language within the governing documents and rules and assuming the association has already complied with the requirement to offer a six month payment plan, either require full payment in order to reinstate pool privileges or offer to reinstate pool privileges if the delinquent owner enters into a payment plan and remains current on the plan. When the pool season is over the owner may return to his delinquent ways, but at least there was successful collections up until the completion of the pool season. In addition, during this process associations gain valuable information that may be used later if judgment is obtained and the association seeks to collect through a bank or wage garnishment.
Accelerating dues is another alternative collection technique available in a majority of the newer declarations. These provisions typically provide after an account has been delinquent for a specified number of days that the association can call the balance for the remainder of the year due. Then, that total amount is the amount that is collected. This is typically most effective during the first or second quarter of the year and is useful when an owner is habitually delinquent.
Another alternative collection tool is to proceed with a receivership action when a property is tenant-occupied or vacant. This is the process by which the court, upon motion, appoints a disinterested, third-party to temporarily divest the owner of control over the property. The receiver seeks to rent the property (if vacant) and the rent collected is used to pay for the receiver’s time and cost and to pay the owner’s delinquent account to the association. When the property is already rented, the receiver notifies the tenant that all future rent payments until otherwise notified are to be paid to the receiver. This usually prompts delinquent owners to contact the association and/or receiver. Although not always looked upon favorably by the courts, receivership actions can be successful given the right set of circumstances.
All in all, successful collections requires thinking outside of the box and utilizing alternative collection tools when available. So the next time you think about April showers bringing May flowers also think of pool keys curing delinquencies.
Heather L. Hartung is an associate at the law firm of White Bear Ankele Tanaka & Waldron where her practice focuses on collections for homeowners associations and metropolitan districts. She may be reached at (303) 858-1800 or firstname.lastname@example.org.