“Condominium Associations Should Have Written Collection Policies & Procedures,” FLCAJ Magazine

“Condominium Associations Should Have Written Collection Policies & Procedures,” FLCAJ Magazine

The 2021 legislative session brought some significant changes to the Condominium Act, the Cooperative Act, and the Homeowners Association Act. These changes went into effect on July 1, 2021, and many of them impacted the collections and foreclosure process for community associations.

At the outset, we always recommend that community associations work with their association’s attorney to craft a written collections procedure. When an association has written policies and procedures regarding collections, it has a greater likelihood of success in its collections for a number of reasons. Among these reasons, written policies and procedures help ensure that the association’s collections are all pursued in the same manner. This cuts down on allegations of selective enforcement and/or preferential treatment. Also, written policies and procedures help in the smooth transition in management of the collections practices through board and management changes. Further, having set procedures helps owners understand the process and manage expectations as to what will happen if they do not keep up with timely payments. There are other reasons, but suffice it to say, it is a good idea to have these policies and procedures.

If yours is an association that already has these policies and procedures in place, note that several of the legislative changes will require these to be updated in a few ways.

DELIVERY OF STATEMENTS OF ACCOUNTS
The changes in the 2021 laws prescribes a new method of delivery of statements of account or invoices for assessments.

If an association sends out regular statements of account or invoices for assessments, this change affects how those statements of account or invoices for assessments are delivered to members. Please note that these changes do not REQUIRE an association to send invoices for assessments or statements of account. Further, unless the association’s documents provide otherwise (and they shouldn’t) sending out assessment “coupons” or billing statements is not a condition to collecting properly levied assessments.

If an association sends out invoices for assessments or a statement of the account, the invoice or statement must be sent by first-class U.S. mail or by email to the owner’s email address, as reflected in the association’s official records. This addition to the statute is of some concern because it does not clarify whether email may be used when the owner has not consented to receive other official notices by email. In an abundance of caution, if an owner has not previously consented to receive email notification, the invoice or statement should be sent via first-class U.S. mail.

Also, before an association can change the method of delivery for invoices for assessments or a statement of account, the association must deliver written notice of the change to each owner, at least 30 days before the association sends the invoice for assessments or statement of account by the new delivery method. The notice must be sent by first-class U.S. mail to the owner at the owner’s last address as reflected in the association’s records, and if the last address is not the property address, the notice must also be sent to the property address by first-class U.S. mail.

In addition, a unit owner must affirmatively acknowledge by email or in writing his or her understanding that that the association will change its method of delivery for the invoice for assessments or the statement of account before the association can change the method of delivery for that owner. The law offers no guidance on what to do if an owner fails or refuses to acknowledge.

30-DAY NOTICE OF DELINQUENCY
Another change in the laws requires the association to send a 30-day notice of delinquency prior to turning an account over to an attorney for collections.

The change requires associations to provide delinquent owners with a 30-day notice of delinquency prior to turning the account over to the association’s attorney for collections. Failure to provide the delinquent owner with this 30-day notice of delinquency will preclude the association from recovering its legal fees related to a past due assessment, i.e., any fees incurred in a collection/foreclosure action.

The 30-day notice must be sent via first-class U.S. mail to the owner’s last address as reflected in the association’s official records, and if the last address is not the property address, the notice must also be sent to the property address by first-class U.S. mail. The notice is deemed delivered upon mailing and a rebuttable presumption that the notice was mailed as required can be established by a sworn affidavit executed by a board member, officer or agent of the association, or by a licensed manager.

Subsection (5) also provides a form for the 30-day notice, titled “Notice of Late Assessment,” and requires the association to list the delinquent assessments, interest, and late fees that are owed.

CHANGE IN TIMEFRAMES FOR PRE-FORECLOSURE DEMAND LETTERS
Finally, there is a change to the timeframes that an association has to notify an owner of its intent to proceed with collections and foreclosure and the timeframes that an owner has to pay the amounts detailed in the pre-foreclosure demand letters sent by the association’s attorney. There are actually two changes that were enacted, one of which affects both condominium associations and cooperative associations and the other which only affects condominium associations.

One of the enacted changes increases the minimum timeframe for a condominium association or cooperative association to notify an owner of the association’s intent to record a claim of lien from 30 days to 45 days. This change provides the owner with an additional 15 days to remit payment for the amounts demanded in the notice of intent to lien letter. The Homeowners Association Act already required this 45 day timeframe.

The second change increased the timeframe for a condominium association to notify an owner of the association’s intent to foreclose it’s claim of lien from 30 days to 45 days. This change provides the owner with an additional 15 days to remit payment for the amount detailed in the notice of intent to foreclose letter.

These changes will require associations to make significant changes to their current collections policies and procedures, especially if the board has a written collection policy in place. Failure to do so could result in serious legal ramifications for the association if the new statutory requirements are not properly followed.

If your association does not currently have written collections policies and procedures, it may be a good time to work with your association attorney to draft these. While the statute sets out minimum notice and other timeframes, the associations may be more lenient and allow even more time.

However, you should keep in mind that the longer the association delays in starting the collection process, the longer it will take for the association to collect the funds necessary to operate the community. As with all things, balance is important and perhaps the simplest way to manage this is to stick to the timelines set out in the now more lenient statutes.

To read the original FLCAJ Magazine article, please click here.

Joy Mattingly is a Shareholder with Becker and the supervising attorney for the firm’s collection and foreclosure practice. She counsels condominium associations, homeowner’s associations and cooperatives on the development of comprehensive collections strategies, including collection and foreclosure actions, and regularly provides representation in mortgage foreclosure actions, surplus funds recovery and receiverships. To learn more about Joy, please click here.