An Association can settle a lawsuit against a delinquent unit owner without violating the ICPA prohibition on forbearing assessments. This is so because the Board is bound by its fiduciary duty and enabled by the ICPA to settle lawsuits, a power which trumps the forbearance prohibition. Think of the forbearance prohibition as one which really only applies to exchanging work or other value for assessment payment, but not something that prohibits the Board from settling delinquent suits.
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A board has a contract with a property management firm. The property management company has a schedule of collection actions it takes at various time intervals. After about 4 months, according to the schedule of collection actions, an overdue account is turned over to the association’s attorney to file for eviction of the owner in arrears. However, that doesn’t occur, and over time the amount due continues to grow, reaching into the tens of thousands of dollars.
ReplyDeleteHow can associations avoid this type of situation? Please describe the ideal process of how a board should handle past due accounts. In these difficult economic times, what is the difference between forbearing, (that is, not pursuing a debt timely) an amount due and being of reasonable assistance in helping a homeowner stay in their home?
Q: The homeowner is evicted and claims not to be able to pay the now substantial bill. How to handle this? Is there a way to avoid this being a loss to the association? Who on a board makes the decision to place a file on inactive status? Comments?
A board should have a lockstep system for collections that land them on counsel's desk no later than 30 days after a missed assessment payment. The demand letter can then be prepared, and 30 days after it has been issued, a complaint filed. There is no excuse for collections reaching that amount. If you enter into a "forbearance", ideally it would be in a confession of judgment for the entire amount but with reasonable payment terms inserted, and on the condition that the unit owner remain current with regular assessments. This vehicle would allow you to enforce the entire judgment if a missed arrear payment occurs and would allow you to tack on attorneys' fees. Note also that a possession judgment can be a money judgment also, such that you can record it and pursue a judgment debtor through wage garnishment, levy or other collection lever. This should be standard practice (recordation and pursuit).
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