Collections 101: The statute of limitations and community association assessments

Today’s subject is one of mystery and misinformation, perdition, and salvation. It is about the statute of limitations on community association debt. 

Let’s start with a working definition of the “statute of limitations” when it comes to debt and the collections of such debt. 

The statute of limitations is a law that sets the maximum amount of time that parties in a dispute must initiate legal proceedings. The length of time allowed under a statute of limitations varies depending upon the jurisdiction it is being disputed. So, where the statute of limitations in your state may be 6 years it could be 4 years in another state.

To be very clear the statute of limitations does not extinguish the debt but rather, ostensibly prohibits the creditor, in this case the community association, from being able to lien and foreclose for the amount that is owed past the statute of limitations. Or at least that is what some people think. 

Does the Statute of Limitations apply to unit owner’s in HOAs and Condominiums?

The other day we received this email from a community association manager who was about to send some files to the association’s attorney for collections. The following is the attorney response:


Good morning, Manager:

Upon reviewing the accounts below, it appears that the statements will need to be adjusted to account for the 4-year statute of limitations.  Starting with today’s date, at a minimum, the board should waive amounts that are beyond the preceding 4-years. 
 
Dewey/Lot 884 – No SOL to be removed – please send a ledger so that I can proceed with the next step; sending a Final Demand letter and updating the Lien.
Cheatem/Lot 418 – $2,476.43 to be removed
Ande/Lot 621- $3,416.73 to be removed
Howe/Lot 255 – $410.00 to be removed
Our REO llc – Lot 212 $1,648.12 to be removed
 
Once the accounts have been corrected, please send updated ledgers so that I can proceed with the next steps.

Best Regards,

Your Attorney, Esq.

The question on the table is if the attorney is right in that amounts should be removed from the ledger to proceed with collections. This is a debatable position for the following reasons:

Regarding the statute of limitations on community associations, we believe that if the unit is owned by an individual, that is in a delinquent position, when the association bills the individual for a new assessment that “tolls the debt,” and starts the clock from the beginning. I have had lawyers tell me that this is not the case, and I have lawyers tell me that I am correct. No lawyer has ever provided me with a law, statute, or judicial decision to contradict the concept that the debt is tolled every time it is charged.

What Can Restart the Statute of Limitations?

  • Making a payment for any amount.
  • Entering a payment plan.
  • Accepting a settlement offer.
  • Agreeing to pay off some of the debt.
  • Acknowledging that you owe a debt.
  • Making a new charge on the same account. (In this case it is the association charging the assessment when the owner is still in possession)

When an association retains an attorney to do collections, they have an obligation to recover the maximum and NOT advocate for the delinquent owner. The delinquent owner has a lawyer, and if it comes to a foreclosure there is a judge that can rule on the point that such and such amounts are not collectible and play no part in the foreclosure action. However, to have an attorney advise an association to write off amounts because of the statute of limitations is defeatism at its finest. 

Most likely the attorney was seeking a clear path to move the file through to foreclosure and that could represent a loss and most certainly a great amount of time wasted. When you engage a collections solution it is important that they advocate for your HOA or Condo when it comes to the amounts that need to be collected. Axela Technologies is in the business of making associations whole again and recovering delinquent assessments. We are not in the business of removing assessments from ledgers that are old. We will fight to get every penny that is legally owed to your association.

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