THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Saturday, March 23, 1996 TAG: 9603210268
SECTION: REAL ESTATE WEEKLY PAGE: 02 EDITION: FINAL
COLUMN: COMMON GROUND
SOURCE: G. ROBERT KIRKLAND and MICHAEL INMAN
LENGTH: Medium: 88 lines
Q. Why isn't an association board permitted to post the names of owners who are delinquent in their assessments and fees? After all the residents who are current with their assessments are ``carrying'' these people.
If the list was posted each month, maybe the delinquents would be embarrassed and pay up. Country clubs post members not current with their dues. Are these people covered by the ``Federal Privacy Act''?
A. One of the most frustrating issues in any association always arises over the issue of collecting past due assessments. The answer to the problem and your question is not easy. There are a number of tactics that are and have been used by associations over the years.
The one tactic that we do not recommend is that of posting the names of delinquent accounts. There are so many different ways that using a posted list can cause problems.
First, if the list is wrong or out of date then there would be the possibility of a lawsuit for libel.
Second, the person or persons on the list could get offended at having their name published and take aggressive action against a board member.
Third, the policy of posting has to be consistent, which means that individuals who are having a hard time financially as well as the deadbeats would both have to be posted.
Fourth, individuals who are in the process of bankruptcy are protected from pursuit by creditors and this might be considered a form of pursuit.
Until recently we have said that association owners were covered by the ``Federal Fair Debt Collection Act.'' Recent court decisions that have said assessments are not ``debts'' and are not covered by the act.
In the current climate, it is advisable to act as if these individuals are covered by the law and not do anything that might bring the association or your manager into conflict with federal authorities or subject them to civil suits.
A good collection policy might follow a structure such as this used by a major association.
Assessments are due on the 1st of each month and late on the 10th.
Late notices are sent out by the 15th.
Any account that becomes 30 days delinquent is sent a notice that the association is accelerating the rest of the year's assessment. This means that if it is February the owner now owes for 11 months instead of one. This can be done only if the association documents provide for acceleration.
On the 45th day after the account was due a ``memorandum of lien'' is filed at the courthouse. This memorandum states the amount and type of lien.
On the 60th day the association files for judgment against the delinquent owner.
The result of this policy is that usually before the account is 75 days delinquent the money is in hand.
In order to protect themselves every association board has to take a number of steps.
First, establish in the budget an Operating Reserved to account for the anticipated delinquencies.
Second, put all of your collection procedures down in a policy resolution and have the board of directors adopt it.
Third, make sure that every owner gets a copy of the policy.
And, fourth enforce the policy. Be even handed and consistent. Do not give anyone a break unless you are going to give it to everyone.
In hardship cases, the board may allow payment plans, but they should be such that the owners can catch up their past due accounts within six months. You should not allow second chances for individuals who do not keep to the schedule.
Quick, effective enforcement will produce the best collection results. However, if you do go to court their are a number of ways of getting your money after you have obtained a judgment.
Garnish wages.
Garnish bank accounts.
Garnish rents for investor owners.
Forced sale of personal property.
Be aggressive, consistent and fair and in most cases the association delinquencies will come down into a reasonable level of 2 to 4 percent. Good luck but please do not post that list. MEMO: G. Robert Kirkland, president of a Virginia Beach property management
consulting firm, and attorney Michael A. Inman specialize in Virginia
community association issues and are affiliated with the Southeastern
Virginia chapter of the Community Associations Institute. Send comments
and questions to them at 2622 Southern Blvd., Virginia Beach, Va. 23452.
To submit questions by phone, call 486-7265; by fax: 431-0410.
by CNB