Many board members and homeowners have questions about their HOA collection policy and how their HOA enforces the policy. We’ve asked our experienced HOA collection attorney team to provide the top questions they hear from association board members to help you better manage your community:
1. What should the Board do when someone in our community is delinquent?
The Board of Directors should always have a HOA collection policy in place to handle delinquencies. While collection policies can be as simple or as detailed as the association needs, we recommend that the association’s collection policy at least address these three areas:
- How to handle small-dollar delinquencies;
- When to send an account to the law firm for collection; and
- What kind of settlements and payment plans the Board is willing to accept.
First, the Board should have an internal procedure to deal with small-dollar delinquencies. This can be as simple as sending a reminder email or late notice to the homeowner to remind them of the past due payment.
Second, when owners don’t make payment when the delinquency is still relatively small, the Board should adopt a procedure in advance to determine at what point the association will escalate the matter to the attorneys. The Board can use a dollar threshold, such as $1,000.00, or it could adopt a policy based on the number of missed assessments, for example, three monthly assessments. This policy should be based on whatever works best for your association. Boards should always keep in mind the statute of limitations for the collection of homeowner assessments is four years, meaning that when the association goes to file suit, it can only demand assessments that came due less than four years ago.
Finally, the HOA collection policy should address what kind of settlement offers and payment plans the Board will accept. For example, is the Board willing to waive late fees and interest on the account? If the Board is willing to waive late fees and interest, would that be uniformly for all accounts, or only for those offering a lump sum payment for the principal due? These are just a few of the considerations for Boards when evaluating settlement parameters.
There are no wrong answers here. The goal is to talk about these issues in advance so that when your HOAs has delinquent owners, the Board knows what steps to take and can handle the matter fairly for both the association and the owner.
2. Where are lawsuits filed to collect delinquent accounts under the HOA collection policy?
Associations must file suit in the county where the delinquent homeowner resides. Usually, this is the same county as where the community is located, but if the owner resides elsewhere in Georgia, then the lawsuit must be filed in the county where the owner resides. However, If the owner lives out of state, then the lawsuit must be filed in the county where the community is located.
3. Can the Board still speak to homeowners once they are in collections with the law firm?
The Board can always speak to their association members, including their delinquent homeowners, with a few caveats. The main consideration here is a director’s own personal level of comfort. For many Boards of Directors, once they send owners to the law firm for collections, they prefer to have all communication regarding the delinquency go through the law firm. Utilizing the law firm as a liaison allows the individual board members to maintain some distance between their role as directors and their roles as neighbors.
If directors do speak to owners about their accounts, we advise that they refrain from discussing specific numbers, particularly any representations of amounts owed. It is okay to discuss generalities, such as whether the Board will accept a payment plan of up to 12 months, or whether the Board is willing to waive late fees and interest. However, we strongly encourage directors to refrain from discussing the amount past due to avoid potentially binding the association to accepting the wrong amount due, including fees and expenses that would have accrued during the collection process. It is always best to keep these conversations general and refer the owner back to the law firm to resolve the debt.
If the Board has referred an account to the law firm for collections, the attorneys will not make make decisions on settlement offers without Board authority. The attorneys will share settlement offers they receive and let the Board determine how to proceed. Settlement offers are solely a business decision for the Board to make. However, collection attorneys are available to provide advice and information about the ramifications of accepting or rejecting owners’ settlement offers.
4. What should an HOA do if an owner is in collections and the Board finds out they are selling the home?
What to do in this situation will depend on the stage of collections. The Board should first confirm if a lien is recorded against the property in the county land records to prevent the owner from selling the home without paying what is owed to the association. If the association is submitted to the Georgia Condominium Act or the Georgia Property Owners’ Association Act, then the association has a statutory lien and the Board does not need to worry about filing anything in the land records. If the association is a common-law homeowners association, the Board must record a lien in the county lien records in order to be protected.
Generally speaking, after confirming the association’s interest is protected, the association will likely want to hold off on any major collection actions. If the owner is going to sell the property, then the association will most likely be paid in full at closing without any further action on behalf of the association. The Board can always pause collection actions for several months to allow time for the marketing and sale of the property. However, if it looks like the property is not going to sell, the association can resume the collection process where it left off.
5. Can an HOA seize an owner’s assets or property, like a car or boat, to collect on the association’s judgment?
Yes, there is a legal process by which an association can attach its judgment to a physical asset, such as a vehicle. In Georgia, HOAs can foreclose on a judgment by seizing a physical asset (also known as personal property) if its judgment lien is the first-priority lien against the property, and the association can gain access to the property.
Personal property (cars, boats, jewelry) is difficult to levy on because the association or the county Sheriff’s office will need to either already have access to the property or have some way of gaining access.
Real property (homes, land) also is difficult to levy on because there is usually a first-priority mortgage or security deed against the property to finance the homeowner’s purchase. However, if your association is subject to the Georgia Condominium Act or the Georgia Property Owners’ Association Act, then under certain circumstances, the association can foreclose subject to any higher priority liens or encumbrances, but only after it files a lawsuit and obtains a money judgment and order of judicial foreclosure.
Contact NowackHoward and our team of experienced Georgia HOA attorneys for your legal needs and any questions you may have about HOA collections.