Homeowner delinquencies create havoc and stress in a community association. Unfortunately, HOAs and condo associations don’t have a lot they can do about them. When a homeowner stops paying their monthly assessments, the association only has a few options to recoup that lost money.
- You can issue warning letters
- You can assess late fees and interest (within the limits of the governing documents)
- You can limit amenity access if your governing docs allow it
- You may be able to initiate credit reporting
- You could take them to small claims court
- You can file a lien to lead to foreclosure on their home
Of these options, the only one that has any real ‘teeth’ in the eyes of the law is lien and foreclosure.
Two sides of the same coin, a lien and a foreclosure are an HOA or condo association’s most aggressive form of collections actions. The lien is the threat of force, a legal response that tells the delinquent owner that this is well and truly their last chance to make good on what they owe to the community. The foreclosure is the bite to that bark, and can be costly and time consuming.
While a foreclosure isn’t something we recommend, filing a lien can often be the very thing you need to yield results. When a homeowner becomes seriously delinquent and the other methods have failed to produce results, you need to be ready to rip the band-aid off and make it happen.
3 Do’s and Don’ts When Filing a Lien
Is your HOA ready to file a lien? DON’T attempt to collect owed payments on your own.
The FDCPA has a laundry list of what have been deemed predatory collections practices, and also specify who can and cannot make collection attempts. Engaging in any kind of communications that could be deemed harassment is only going to hurt your community in the long run
Is your HOA ready to file a lien? DO thoroughly document each of the notices and demand letters you send to the delinquent owner.
Keeping track of the specific requests and demands you have made, as well as when you made them, will help keep your association free and clear of any claims of harassment or illegal collections allegations.
Is your HOA ready to file a lien? DON’T file a lien before sending warning notices to the homeowner.
Those notices aren’t just common courtesies, they’re required interactions your association must have with a delinquent homeowner. They are entitled to a certain amount of time to pay back monies owed before legal action is taken against them.
Is your HOA ready to file a lien? DO check your CC&Rs AND state’s restrictions and laws to make sure you’re complying before filing a lien.
These restrictions will set forth the ways you’re required to communicate payment demands, the fees and charges you’re allowed to include in the lien, and any time constraints you have to abide by.
Is your HOA ready to file a lien? DON’T just refer the file to your attorney.
Your primary goal should be to collect the money you are owed, not to punish delinquent homeowners. Referring a collections file to your lawyer is not a method of collection, but rather an intention to foreclose as soon as possible so you can get in a better paying homeowner. As the saying goes, a bird in the hand is worth two in the bush – working with your existing community members to set up a payment plan or find another way to settle the debt is almost always better than giving them the boot. Foreclosure does not result in money in your pocket, just an empty home on the block.
Is your HOA ready to file a lien? DO call Axela to take advantage of ethical collections practices that come with a 95% success rate or recovery.
Axela Technologies specializes in HOA collections practices that successfully recover funds for the community without the inhumane, barbaric treatment owners tend to get from the foreclosure process. Is your HOA ready to file a lien? Call us today or click here for your no-cost collections analysis