Real Estate & Property Law

Collections in HOAs - What is Working?

I was recently at the National CAI Law Conference in Palm Springs where hundreds of HOA attorneys from across the country attended classes and brainstormed about HOA problems. Guess what the prevailing issues were for everyone - how to keep the HOAs, the members, the vendors and selves afloat during these tough times. HOAs are struggling and that brings a cloud over all that serve them. There was even a class on bankruptcy and how the bankrupt and foreclosed owners are suffering, and how that is causing a domino effect on their HOAs and others in them.

The following week I attended the CACM Northern California conference in Oakland where over 500 managers came together to attend classes, talk to vendors, etc. Guess what the prevailing concerns are among the managers - yes.... collection of delinquencies, and HOA payment of HOA bills.

Out of these conferences a couple of things came to mind that you don't hear a lot about, but they may help if integrated into the HOA practices or management duties.

ONE: Some boards and management companies are having some luck getting owners on payment plans before the matters get to collections and trigger the attachment of collection costs that in some cases equal or exceed the delinquent amount that is outstanding. Once an owner realizes (1) they can work it out when they get behind, (2) they can avoid exhorbitant fees, and (3) they can be held personally liable for all delinquencies if their lender forecloses, they may be more willing to work with the board or manager to work out a solution.

TWO: In November last year I sent out an E-newsletter outlining a new law that allows HOAs to record a "Request for Notice" of a Trustee Sale. The problem was that HOAs were having a very difficult time identifying buyers or lender take backs from foreclosure sales because the sales sometimes were postponed several times and the buyers were hard to locate when the sales did take place. If the HOA records the request (see the November 2008 E-Newsletter in the Archives at my website at http://www.californiacondoguru.com to find the form), then the question that some managers asked me over the weekend at the CACM show was: "What teeth does the new law have? What can you do if the Trustees do not notify the HOAs as they are supposed to do? Who enforces this law?" (Frankly, this sounds a lot like the questions owners ask about itinerant board members, but ...)

My suggestion was this: Put a form letter together demanding that the Trustee follow the law and cite the law in SB 1511 (discussed in the E-News article). And then everytime you get a Notice of Default in the office for an HOA property (the lenders have to send proper notices or they cannot get the junior liens extinguished when they hold their own foreclosure sales), shoot out a letter to the Trustee listed in the Notice of Default. Say something like: "We trust you are aware of the law and the requirement to send us notice of the purchaser at the Trustee Sale on this property when it occurs. If you fail to do so you could be responsible for any losses that we incur for failure to have this information in a timely fashion. Our Request for Notice is recorded at .... blah blah blah."

A written demand tends to engender more accountability than a lick and a prayer. (Well, not always, but in this business, ... maybe ....)

Think outside the box! Stay one step ahead in the process of following the money. Be diligent in collecting and do not let people get so far behind it becomes hopeless for them. These measures will not necessarily solve all crises, but could help in many situations.

Full post as published by California Condo & HOA Law on February 10, 2009 (boomark / email).