HOA debt collection and community association management are two very highly-regulated industries. Between sweeping federal regulations like the FDCPA, state statutes dictating operational and communication requirements, local city or county rental ordinances, and of course, individual community governing documents, there is a lot of governance in the HOA and condo association world.
This abundance of legislation can make it hard for board members to know what steps they’re allowed to take (and when!) regarding HOA debt collection.
HOA Collections: Condition Precedent and Process
When an owner goes delinquent on their HOA dues, the community usually has a security interest and the ability to foreclose and take limited title to a property. Before they exercise the security interest, and even before they can send a unit into collections, there are specific steps that must be taken. These steps are called “Condition Precedent.”
A condition precedent is defined as “a condition or an event that must occur before a right, claim, duty, or interest arises.” In plain English, certain tasks must be completed before an anticipated action can occur (like a collection effort). You can’t take a vacation until you’ve saved up enough money, right? Same concept.
If your management team does not get the condition precedent right, then your HOA or condo association cannot send a file to collections. Period, end of story. So these are very important steps of the collections process.
What Condition Precedent is Needed to Send a File to Collection?
Condition precedent can vary widely depending on what part of the country you are in and what other legal restrictions your community is under. This will mostly depend on where your HOA or condo association is located, but it can also be impacted by what your own governing documents state.
Some states require a host of steps that need to be taken before a community association can move a file to a collection agency. Some of these steps include but are not limited to:
- The association must send a courtesy letter to a delinquent owner.
- In some states (Colorado, for example), if the owner speaks any other language besides English, the community association is required to communicate in their language. This can be critical. It must be a good translation from English that would be acceptable in a court if necessary (so Google Translate is probably not good enough).
- Sending a Notice of Delinquency to the delinquent owner via certified mail, return receipt requested.
- The notice should advise the owner that they can enter into an 18-month payment plan.
- This notice must also advise the owner regarding:
- Unpaid assessments.
- Unpaid fines for violations.
- All other charges should be itemized in this notice.
- And the association needs to advise the owner that a security interest exists, and the community exercises its right to foreclosure.
- The association must have a Uniform Collection Policy that will review the steps that the association may take to collect the past due assessments.
- The board must take a vote (in a closed session) before they send a unit into collections.
Get Help Navigating HOA Collection Condition Precedent
While this list covers many common condition precedent requirements, every state will vary. If your association misses a step, it could very well mean that you will lose any progress you’ve made and be bumped back to step one. Community association management firms should understand what their communities are expected to do legally before sending a unit into collections.
Axela Technologies has a team of experts who understand all of the condition precedent steps needed and can help educate on this exact matter. Whether you’re a management company looking to help your associations stay on track, or a board of directors seeking out HOA debt collection assistance, Axela can help.
When you are ready to recover your money, avoid the hassle and get a professional to help. Click here for a free, no-risk consultation with an Axela collections specialist.