MARYLAND COMMUNITY ASSOCIATION COLLECTIONS GUIDE

Welcome to Maryland

The state of Maryland has over 1 Million Marylanders in over 500,000 homes living in community associations. According to CAI, these residents pay $1.8 billion a year to maintain their communities.

By 2040 it is expected that the community association housing model will become the most common form of housing in Maryland. Homes in community associations are generally valued at least 4% more than other homes.

Before you read anything on this page about the laws governing Condo and HOA collections in Maryland, make sure you have read the governing documents for your association. The governing documents may be stricter than the state laws, and in those cases, the governing documents take precedence.

As a general rule, neither your management company nor board members should attempt to make contact with delinquent homeowners in an attempt to collect the debt, beyond the initial courtesy letters. You need an attorney or a licensed collection agency to collect on your behalf.

How to improce HOA delinquencies

How to Reduce Your Condo/HOA Delinquency Rate

Are you living with the Consequences of nonpaying homeowners? If so, you need a better approach to collections for your community association!

This guide will will give you the same techniques that we use to help our clients reduce delinquencies, all but eliminate bad debt write-offs, and see significant savings on legal fees.

Maryland Collection Laws

Yes, Maryland has state laws pertaining to HOA and condo associations.

To better understand the laws for Maryland HOAs, please refer to:

  • Maryland Homeowners' Association Act - §§ 11B-101 through 11B-118. This Act governs the formation, management, powers, and operation of homeowners’ associations in Maryland.
  • Maryland Cooperative Housing Corporation Act Md. Code, Corporations & Associations §§ 5-6B-01 through 5-6B-33. The Act recognizes and provides a structure for cooperative ownership, including formation, management, voting, and ownership rights in Maryland.

To better understand the laws for Maryland condos, please refer to:

  • Maryland Condominium Act - §§ 11-101 through 11-143. The Act applies to all condominium associations, except as otherwise provided in the Act. For more on the applicability of the Maryland Condominium Act to condominiums that were established before July 1, 1982, see § 11-142.

Maryland is a Homestead state. Unlike most states, Maryland’s Homestead State provisions do not specify an acreage limit, but instead, limits are placed on the total value that can be set aside if you file for bankruptcy. Under Maryland law, the property cannot be valued at more than $3,000 for a single individual, plus a possible $2,500 in a Title 11 action.

In addition to the Federal Fair Debt Collection Practices Act (FDCPA) statutes, Maryland has its own laws regarding collections. The statutes codified in the Maryland Consumer Debt Collection Act are similar to the FDCPA in many respects, but broadens some definitions of terms and people.

Yes. Maryland Collection Agency License Act states that a management company is considered a “collection agency” whenever it seeks to collect a debt on behalf of a homeowner’s association. As a result, a management company must have a collection license from the State Collection Agency Licensing Board to avoid possible criminal misdemeanor imprisonment, fines, or both.

Moreover, in addition to the management company entity itself, an employee of an unlicensed management company can be held personally liable for seeking to collect a debt on behalf of an HOA without a collection agency license in Maryland.

An HOA can collect as much as is legally owed to them in fees, violations, special assessments, administrative costs, and legal fees - as outlined in the governing documents of the association.

Maryland laws place no restrictions on what you can do with the money your association collects in past-due assessments. As long as the money is accounted for in the budget, aligns with the governing documents, and/or is approved by the board of directors it can be spent on any improvements or maintenance that is required by the association.

An association should always contact a delinquent owner to advise them regarding what is owed. Every owner is entitled to see their ledger and know how much they are owed. An owner may request their ledger at any time and an HOA should be willing and able to provide it to them. 

An association that publicly publicizes information about a homeowner's unpaid assessments potentially violates the federal Fair Debt Collections Practices Act which forbids disclosure of information to third parties relating to a debt (which includes HOA assessments).

Yes. Once a property has gone through probate and the court has decided who is the legal owner, all the past due fees are due and payable to the HOA unless the governing documents have a provision that says the debt rolls over to the association. Going forward, after probate has been settled, the new owner must pay their fair share.

Yes. Maryland is a super lien state. An HOA’s assessment lien in Maryland has priority, up to a specified amount, over the liens created by a lender’s earlier-filed first mortgage. This is referred to as a “super priority lien” and references the fact that in the event of a foreclosure sale, the super priority portion of the assessment lien must be paid to the HOA from the sale proceeds before satisfying the lien amount of an earlier-filed lender’s mortgage.

When faced with a foreclosure proceeding, a lender may offer to pay off the super priority lien amount on behalf of the delinquent lot owner in order to prevent the foreclosure and thereby protect its mortgage or deed of trust.

Finally, a bank foreclosure does not extinguish the debt that is owed to the association and the association has the right to pursue the old owner in court for a monetary judgment to recover this debt. It may not be a secured debt but it is surely collectible unless the governing documents say that the debt owed to the association rolls over to the membership.

Yes. Foreclosure should be the last desperate attempt to recover the association’s money. An HOA should consider a merit-based collection agency to recover its delinquent money before moving to put people out of their homes. Notices should be given to a delinquent before any action is taken.

The traditional way to collect is to have the management company send a few courtesy letters to a delinquent owner and then send the file to the attorney for foreclosure. Maryland is a Judicial Foreclosure state and the process can be long and expensive, so consider partnering with a merit-based collection agency that specializes in collections for HOAs and Condos.

The best way to handle collections for HOAs is to engage the owners and be armed with all the information you can acquire. Know the equity in the unit, read and understand the governing documents, find out where the owner is, and then begin to engage in the collection efforts. Once again, this is a very heavily regulated industry so this should be done by professional and licensed companies. Once you engage with an owner, you may be surprised to see that most of them will cooperate and come to the table. You just have to ask them and be willing to work with them.

Yes. The board of directors has a fiduciary duty to collect these assessments and if the individual is not in bankruptcy there is nothing legally stopping them from the collection of delinquent assessments.

12 years. The statute of limitations periods for HOA claims are different for every state. These periods often range typically somewhere between two and six years, so Maryland is a bit of an outlier. According to the Maryland Contract Lien Act § 14-204, actions to foreclose a lien shall be brought within 12 years of the date the statement of lien was recorded.

Yes. Maryland does not differentiate between an in-state and out-of-state owner from a collections perspective. So, the HOA enforcement actions must be filed within 12 years for both in-state and out-of-state owners.

Yes. The management company must register with the Maryland Collection Agency Licensing Board.

Yes. Under the Maryland Constitution, Article III, Section 57, the legal rate of interest is 6% per annum, unless a statute allows for a higher rate of interest. Unlike the Maryland Condominium Act, the HOA Act is silent on the issue of charging interest on delinquent accounts. Therefore, if no rate of interest for delinquent assessments is set forth in the governing documents, then the maximum interest that can be charged is 6% under the Maryland Constitution.

If the file has not gone to the attorney it is advisable to contact the manager or treasurer of the association to get a copy of the delinquent ledger. Then review the ledger and if you can prove that you made payments that were not applied properly, advise the management company. If the file has been sent to a collection agency the law requires that the collection agency give the debtor 30 days to dispute the debt.

How The Future Collects

Secure Delinquencies

Traditionally a board of directors will have their management company send a delinquent file to an attorney for collections. The question is: Are attorneys collecting or merely foreclosing on your neighbors property? Are you receiving checks from your attorney from delinquent owners or titles to properties that you have to then monetize?

HOA collections should be about recovery, not punishment. At Axela Technologies we keep our eyes on the prize, and our only goal is to recover every cent that is owed to your association, period.

Advanced Technology

Collections is traditionally an outdated industry, relying on phone calls and threats to get the job done. At Axela, we believe that ethical collections is not only possible, but necessary if we are to succeed.

So we have brought our collections operation into the modern age with email, SMS, transparent reporting, and recorded calls our clients can review online. On the back end, our process relies on information gathering and prediction algorithms that help us determine the best way to approach each individual case, making sure we have access to all the facts.

Human Connection

Delinquent homeowners are real people with genuine problems that need to be addressed. We never forget that we are dealing with people’s homes and their very lives. 

Even in this digital age, the value of a real live human being cannot be underestimated. We combine our advanced technology with a human touch to construct a resolution that serves both the homeowner and the association. We do this by engaging them, listening to them, and helping them get on the right track. It’s good for the membership and great for your community association.

Why AXELA?

Axela Technologies provides no cost and no risk collections for community associations using best practice collections strategies, advanced proprietary technology, and highly trained customer service representatives. We are licensed in the state of Florida and compliant with the Fair Debt Collections Practices Act (FDCPA).

We are a specialized collections service which means a great deal in the community association industry. Understanding the nuances of how people fall behind in their maintenance fee payments and how to resolve their issues is a science and an art. At Axela Technologies we have what it takes to “move the needle” and recover 100% of what is owed to the association and the best part is that we are totally merit based. IF WE DON’T RECOVER YOUR MONEY WE DON’T GET PAID. A pretty simple concept but a bold promise at the same time.

Our proprietary software is second to none and we have the ability to keep the management and board of directors informed in real time 24/7. Our system never sleeps. The technology is fantastic and is only equaled by the people who will service your delinquent members and work with them to resolve their delinquency issues.

Schedule A Personalized Walk Through

In your free demonstration of Axela Technologies customer portal, you'll see how the process works for a delinquent owner and the transparency Axela provides into the collection process, with every action from our collections team being logged and documented for your review.