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When Insurance Claims are Denied, HOA Collections Come to the Rescue.

When Insurance Claims are Denied, HOA Collections Come to the Rescue.

When Insurance Claims are Denied, HOA Collections Come to the Rescue

Written by Mitchell Drimmer

In a report published on July 3, 2024, Newsweek Magazine observed that insurance companies are denying an extraordinary number of claims to Florida Homeowners Associations (HOAs) and condos. Being paid out for insurance claims properly as a homeowner in Florida brings you close to a 50/50 chance of being made whole, especially for HOAs. Recent data from Weiss Ratings reveals a concerning trend: nearly half of all damage claims submitted by Florida homeowners to three major insurers—Castle Key Indemnity, State Farm, and Castle Key Insurance—were denied last year. This alarming statistic underscores the difficulties many community association owners face when seeking coverage for property damage. This article explores how HOA collections come to the rescue when insurance claims are denied.

It’s Not Just a Florida Problem

States other than Florida are experiencing similar woes. For instance, California has been facing challenges with insurance claims, especially in areas prone to wildfires. Insurers have increasingly denied claims or refused to renew policies in perceived high-risk areas. In tornado-prone states like Louisiana and Oklahoma, homeowners also face significant challenges. These states often see higher denial rates due to the frequency and severity of natural disasters. Insurers in these regions are more cautious, leading to stricter scrutiny of claims.

High Denial Rates Among Major Insurers

Weiss Ratings’ analysis points to significant denial rates, with Castle Key Indemnity Company leading in Florida, denying 47.1% of claims closed last year. State Farm Florida Insurance Company and Castle Key Insurance Company followed closely, with denial rates of 46.4% and 46.0%, respectively. Although State Farm contested the accuracy of the data, the high denial rates highlight a substantial issue for homeowners and associations striving to obtain payouts.

These high denial rates can severely impact HOAs, which manage shared amenities and infrastructure. When claims are denied, the burden of repair costs falls on the HOA and, consequently, the homeowners. It is an economic reality of communal living. Sometimes, homeowners must fund repairs to their personal property and help the HOA pay for repairs to common areas due to denied claims. This situation underscores the critical importance of robust collection practices within HOAs to ensure sufficient funds are available to cover these unexpected expenses.

HOA Collections to the Rescue

Given the current insurance landscape, HOAs in Florida and other affected states must prioritize their collection strategies. Here are some critical approaches:

  • Uniform Collection Policy. If you have an emergency plan for hurricanes, you should have a plan for delinquencies. When and how will you deal with members who pay late or completely default?
  • An up-to-date roster. When we read about association governance, we are often told to communicate better, which is correct. However, good communication starts with good contact information, and we are willing to “bet dollars to doughnuts” that your community has a defective roster that lacks your membership’s current contact information. Before you can communicate, you must put together a proper roster. When you have a good roster with accurate and up-to-date contact information, you can speak to the importance of timely dues payments to all homeowners, explaining how these funds pay for maintenance and emergency repairs.
  • Offer flexible payment plans to accommodate homeowners facing financial difficulties, ensuring a steady flow of funds. You can do this before you send the owner to a collection agency.
  • Foreclosure is the last desperate attempt to collect delinquencies. HOAs should avoid it when possible. However, it should not be off the table. If your delinquent owners know that the association will not “pull that trigger,” then you can expect delinquencies to linger, repeat, and last forever. When this happens, come this budget season, boards and managers must create a line item in the budget for “doubtful debt.” This line item adds to the financial burden of those paying on time, which is unfair. Conduct a free pre-foreclosure analysiswhen foreclosure is unavoidable to avoid passing along this unfair burden.
  • Most associations can suspend amenities and voting rights of delinquent owners. Enforce this governing document provision to minimize ongoing delinquencies.
  • In Florida, if you have a delinquent investor-owned unit, you can legally intercept the rent money with just one pre-written letter, as provided in statutes 718.116 and 720.3085. Click here to review the statutes for other states.
  • Review your aging report every month, and if you don’t have board meetings regularly, have a system that will auto-submit a unit that has hit a delinquency threshold to collections with a board resolution. Your Uniform Collection policy should set the threshold, and your bookkeeping department should adhere to it.
  • When the delinquent owner fails to make good on their obligations after the board has sent courtesy letters and requests for payment, it is time to consider a collections company specializing in HOA and condo collections. You may want to speak to Axela Technologies first.

Focusing on Collections is Proactive Financial Management

As the data from Weiss Ratings reveals, Florida homeowners face significant challenges in securing insurance payouts for damage claims, and other states are in similar trouble. This reality makes robust collections even more critical for HOAs. By implementing effective collection strategies, HOAs can ensure they have the necessary funds to manage and maintain their communities, even when insurance claims get denied.

In these uncertain times, proactive financial management and clear communication with homeowners can help HOAs navigate the complexities of insurance claim denials and maintain the quality of their communities.

Contact us today to learn more about how Axela makes HOA collections equitable, efficient, and affordable.

 

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Condo HOA Loans: We can assist you in obtaining the necessary funds for Projects, Reserves, or Cash Flow.

Condo HOA Loans: We can assist you in obtaining the necessary funds for Projects, Reserves, or Cash Flow.

  • Posted: Oct 23, 2024
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Condo HOA Loans

We can assist you in obtaining the necessary funds for Projects Reserves or Cash Flow.

Your Trusted Community Association Financial Resource

 

Don’t go it alone. Whether your Community requires Conventional or Private Lending, CondoHOALoans can assist you in obtaining the necessary funds for Projects, Reserves, or Cash Flow.

When your Community Association works with our Law Firm to facilitate and secure financing, your Community will also have the optional benefit of receiving 100% FREE Delinquent Account Collection Services.

Not sure if financing is right for your Association? Download the Association Funding Options Infographic and take our Free Financial Health Survey to find out.

 


Take the Free Financial Health Survey

Completing this Survey will provide you with a written report you will be able to immediately download upon completion.

Take Our FREE Financial Health Survey

 


Association Funding Options

Getting started with CondoHOALoans is easy.

We’ll help your community identify funding resources and lending options for all of its financial needs. Our Legal Services to your community do not end at the successful closing of your loan with the Lender of YOUR choice. As a valued client of Katzman Chandler, you will have the option, but not the obligation, to have ALL future delinquent accounts collected for FREE.

 

The Condo Building Maintenance Crisis in Florida

As a consequence of hurricanes, business cycles, and fluctuations in the real estate market over the last 20 years, financial distress has been caused to those who live in Community Associations as well as the Communities Association entities themselves.  There presently exist hundreds (if not thousands) of communities whose stories can be illustrated by the timeline below.

Many of these communities presently have underfunded budgets, inadequate cash flow, and lack adequate reserves to accomplish necessary preventative maintenance and actual present maintenance needs. Overall, Boards are starting to realize that there is a lot to do, with little or no money to do it.

 

CondoHOALoans is the best solution for customized, competitive lending options.
Download the Infographic to learn more.

(833) 427-3863

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Introducing The Auto-Submit Platform for Servicing Delinquent Accounts! by Axela

Introducing The Auto-Submit Platform for Servicing Delinquent Accounts! by Axela

  • Posted: Oct 20, 2024
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We’re thrilled to announce a groundbreaking advancement in community association management: the launch of Auto-Submit, the industry’s first AI platform for identifying and servicing delinquent accounts, by Axela Technologies.
 
In an industry where timely recovery of past-due assessments is paramount to financial stability, Axela’s Auto-Submit is a game-changer. This cutting-edge AI engine is designed to streamline collections processes, resulting in faster resolutions and cost-effective outcomes.

 

Here’s what you need to know about Auto-Submit:
 
Efficiency at Scale: With deep integrations with leading accounting systems, Auto-Submit allows you to automate uniform collections policies and unit submissions. This ensures consistency across your portfolio and drastically improves aging trends, all while maintaining compliance with federal, state, and local laws.

Set It and Forget It: Configuring Auto-Submit is a breeze. Set your preferences, and the system executes the process from start to finish. Say goodbye to manual interventions and hello to autopilot collections.

Enhanced Responsiveness: Auto-submit doesn’t stop at collections. Our latest release also includes features for email responsiveness and call archiving. You can ensure prompt and accurate communication with homeowners with near-immediate email responses and detailed call transcriptions.

Continuous Innovation: We’re committed to advancing our AI platform to serve your needs better. As we develop new features, you can rest assured that Axela remains at the forefront of community association management technology.

We invite you to experience the future of collections with Auto-Submit. Schedule a demo today to see how Axela can transform your collections process and drive financial stability for your community.


Upcoming Event!

ONLINE AUTO-SUBMIT WEBINAR

April 18, 2024 @ 3PM EST.

Join us for an exclusive webinar unveiling Axela Technologies’ groundbreaking AI platform, Auto-Submit, revolutionizing delinquent account servicing in the CAM industry. Learn how our innovative solution ensures faster resolutions, compliance, and cost-effectiveness while putting your collections on autopilot. Don’t miss this opportunity to discover the future of collections!

Sign up Today!


Alexa Technologies is the top Collections Company SFPMA stands behind for every Condo, HOA in the State of Florida.  Every Property Management Company and their Team members should learn how Alexa can aid them with the properties they manage.  View Axela Tech’s Membership page on our members directory.

 

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A Guide to Sending the New Notice of Late Assessment  By: K. Joy Mattingly, Esq.

A Guide to Sending the New Notice of Late Assessment By: K. Joy Mattingly, Esq.

  • Posted: Jul 16, 2024
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A Guide to Sending the New Notice of Late Assessment

By: K. Joy Mattingly, Esq.

As of July,  associations are required to send delinquent owners a Notice of Late Assessments, giving the owners 30 days to bring the account current prior to turning the account over to the association’s legal counsel for collections.

Failure to provide the delinquent owner with this 30-day notice will preclude the association from recovering legal fees related to past due assessments, i.e., any fees incurred in a subsequent collection/foreclosure action.

The notice must be sent via first class United States 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 United States 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.

A form for the 30-day notice, titled “Notice of Late Assessment” can be found in §§718.121, 719.108 and 720.3085, Fla. Stat.

While the statutory instructions for the Notice of Late Assessment may appear to be straight-forward and easy to follow, there are several ways that the process can go awry. These missteps can result in an association having to send out a new Notice of Late Assessment, further delaying the collections and foreclosure process and adding to the association’s workload and frustration. But fear not! An association can avoid pitfalls in the process by incorporating the following best practices when drafting and sending the Notice of Late Assessment.

First, when detailing the delinquency in the Notice, the assessments, interest and late fees owed should be broken out rather than listed as a lump sum.

If there are other amounts owed, such as fines, these should be listed separately from the monthly or quarterly assessments. Late fees (if applicable) and interest should be listed below the monthly or quarterly assessments and the annual rate of interest should be detailed as well.

Second, when sending the Notice of Late Assessment, the association should check the county property appraiser’s website and the current deed for additional mailing addresses for the owner. While the statute requires the association to send the notice to the property address and the last address “as reflected in the association’s records”, there is always the possibility that the association’s records have not been properly updated or maintained to include additional addresses. Taking a few minutes to conduct this search at the beginning of the process can eliminate the possibility of an owner subsequently arguing that the association failed to send the notice to a relevant address. If the owner is successful in this argument, the association will be precluded from collecting the subsequent legal fees incurred in the collections/foreclosure process.

Third, the association should keep a copy of each Notice of Late Assessment sent to an owner as part of the association’s records. This will enable the association to provide the copy in support of the association’s sworn affidavit that the notice was mailed to the owner, should the owner subsequently dispute that the notice was provided.

In addition to following the best practices detailed above, the association should consult with its legal counsel to confirm that the association’s collections policy, practices and procedures are in conformance with the applicable statutory requirements.

 

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When unit owners refuse to pay their assessments, it puts everyone in a bind, condominium assessment liens might be one way?

When unit owners refuse to pay their assessments, it puts everyone in a bind, condominium assessment liens might be one way?

  • Posted: Jul 16, 2024
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Florida Condominium Associations and Homeowners Association Boards have many challenges in managing the needs of their communities. As a result, when unit owners refuse to pay their assessments, it puts everyone in a bind. Fortunately, there is a key tool that you may use in Florida to compel payment of the monies due: a condominium assessment lien.

Collecting Assessment Revenue Through A Condominium Assessment Lien
There are steps that must be taken in order for a condominium association lien to be properly filed. This is a brief summary of the steps:

 

*A condominium association’s governing documents in conjunction with Section 718.116, Florida Statutes, are the genesis of the condominium association’s authority to impose and perfect assessment liens against individually owned units within the community.

 

 

Delinquency Notice

This is not a requirement but good collection practices dictate that the association attempt collection efforts prior to engaging a law firm. Sometimes the unit owner may have just forgotten to place the payment in the mail. These delinquency notices can help remind the unit owner of their payment obligation.

 

Notice of Intent to Lien

The first statutorily required step is to send a formal letter from the law firm announcing the association’s intent to place a lien on the unit for the failure to pay. The letter has very specific requirements and should be sent from the association’s attorney. If a condominium, the association must wait 30 days from the date of this letter to record its lien. The time frame for a Homeowners Association is 45 days.

 

Claim of Lien

This is the actual document that gets recorded in the public records and encumbers the unit. It must have the Unit legal description, the owners name and a description of the delinquency. There is a form in the statute and Florida law requires that this lien be created and recorded by the association attorney.

 

Notice of Intent to Foreclose

After the lien is recorded, another notice must go to the unit owner announcing the intention to take the unit by legal process. The association must also wait an additional 30 days after this notice is sent. 45 days for HOAs.

 

Foreclosure Action

This is the lawsuit that will take the unit. A Lis Pendens is recorded when the lawsuit is filed to provide public notice of the legal action on the lien. Most lien foreclosure actions result in either settlement of the claim of taking of the unit. Defenses to lien foreclose actions are tough to prove and seldom release the unit owner from the obligation to pay the assessment.

 

 

Time Is not on your side, dont delay if this is the action you are taking?

It is imperative that all these steps are followed to the tee or the lien may be dismissed outright. In addition to these steps, Florida condominium associations can take additional steps such as suspending unit owner common element or amenity rights. This is done by alerting the unit owner of the delinquency and then if amount is greater than $1,000 and 90 days the Board may consider the suspension of voting rights at a board meeting. The unit owner will then receive notice of the suspension after the vote has occurred.

 

Florida Condominium Associations

Under Florida State Law, only an attorney may draft a condominium assessment lien, because it contains a legal statement. Once the lien is filed, there is a one year timeline for Florida condominium associations to file suit. If the Association misses that deadline, the whole lien process will have to be redone. Therefore, it is paramount that the steps are followed properly, and in a timely fashion, or you may forfeit what is due to the community.

Remember to contact your Attny, Ask them for the best options for your communities!

 

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The Corporate Transparency Act and Your HOA/Condo.

The Corporate Transparency Act and Your HOA/Condo.

  • Posted: Jul 16, 2024
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By: Mitchell Drimmer, CAM

President, Axela Technologies

Starting next year, Community Associations (HOAs & Condos) in the U.S. will have to follow new rules. These rules are part of something called the Corporate Transparency Act (CTA). The CTA requires most Community Associations (HOAs & Condos) to share information about the people who own or control the association. This is called a beneficial ownership report. While some non-profit groups are exempt from this rule, most Community Associations (HOAs & Condos) are not.

Community Associations (HOAs & Condos) are groups that take care of neighborhoods. There is a lot of money flowing in and out of these associations and many boards of directors and even their management companies are not quite ready for this process. There are a lot of Community Associations (HOAs & Condos) in the U.S., more than 355,000 of them. They serve around 74 million people which is about 24% of the population of the United States.  Community Associations (HOAs & Condos) are not exempt as they may be the perfect place to engage in money laundering for the purposes of fraud (unjust enrichment), and terrorism. The CTA was specifically established to make money laundering more difficult.

The new rule says that Community Associations (HOAs & Condos) need to provide specific information about the people who own or control the association. This includes their names, addresses, and other details. This information will be collected by a government agency called FinCEN. The goal is to make sure this information is not available to the public, but it can be used by law enforcement. There remain some questions regarding owner access to association records but as we all know Federal law overrides State laws and an association’s by-laws.

Most Community Associations (HOAs & Condos) need to report. They are considered “reporting companies” under the CTA. This means they must file the beneficial ownership report. There are some exemptions, but most Community Associations (HOAs & Condos) won’t qualify for these exemptions. This will add costs to the management of community associations and naturally will be passed through to the owners making life more expensive for community associations. Adding this to structural inspections, increased insurance premiums, and rising costs, this is not good news.

Community Associations (HOAs & Condos) need to figure out who their beneficial owners are. These are people who have control over important decisions in the HOA. It could be board members or others who influence how the HOA operates. Community Associations (HOAs & Condos) need to collect specific information about these people and report it to FinCEN. They also need to update this information if anything changes. The Board of Directors will now be scrutinized more than ever before, making it even more difficult to enjoin volunteers to run for board positions.

The new rule starts on January 1, 2024.

Existing Community Associations (HOAs & Condos) have until January 1, 2025, to file their first report.

Community Associations (HOAs & Condos) formed after this date must file within 30 days of their formation.

Community Associations (HOAs & Condos) need to understand these new rules and make sure they follow them. It’s important to collect the right information and report it on time. If they need help, they can talk to community association specialists who have studied this matter. These rules are meant to increase transparency and prevent fraud, so following them is essential.

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Axela Technologies – Your Trusted HOA Collections Solution Platform 🌟

Axela Technologies – Your Trusted HOA Collections Solution Platform 🌟

Homeowners Association (HOA) collections can be a source of stress and anxiety for those who fall behind on their dues. Nobody wants to risk losing their cherished homes due to unforeseen financial challenges. But here’s some good news – there’s a better way!

🌟 Enter Axela Technologies – Your Trusted HOA Collections Solution Platform 🌟

We understand that life sometimes throws curveballs, and financial struggles can happen to anyone. That’s why we take a compassionate and understanding approach to HOA collections, unlike some attorneys who may resort to foreclosure threats.

📖 In our latest article, we dive into the stark differences between attorneys who may pursue foreclosure and Axela Technologies, your partner in HOA collections.

💡 So, what sets Axela apart?

✅ Compassion: We genuinely care about your situation and work to find solutions that fit owner’s needs.
✅ Understanding: We know that financial difficulties can be temporary, and we’re here to help owners get back on track.
✅ Communication: We believe in transparency and open dialogue to find the best resolution.
✅ Avoid Foreclosure: Our goal is to prevent foreclosure threats and help you keep people in their homes!

Learn how to ease the burden and provide peace of mind during challenging times.


We Know Community Associations

Specialized Collection Solutions for Condos & HOAs

Take Control of Your Accounts Receivables

If your community association is suffering from high delinquency rates and long recovery times for delinquent fees, it’s time to take a proactive approach to community association collections.

The Consequences of Poor Collection Practices

When members of your HOA or Condo association pay late or have decided not to pay their fair share, it causes problems for everyone. Legal fees and dissent between the board and community members are just the start. A long-term pattern of delinquencies can affect your community’s ability to become approved for government loans for new owners, or to get loans for capital improvements.

There is an alternative to a legal process of lien and foreclosure. A  collections process is the best alternative to foreclosure.

A Better Way to Manage Delinquencies

Axela-Technologies is dedicated to helping create streamlined accounts receivable and collections tools for management companies, condo and homeowners associations and others in the real estate industry. We work with you to get a jump on recovering delinquent funds quickly, painlessly and ethically.

 

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Elevate Your HOA and Condo Collections with Axela!

Elevate Your HOA and Condo Collections with Axela!

  • Posted: Feb 02, 2024
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Discover why Axela stands out as the ultimate choice for managing your community’s finances and collections.

Axela is here to revolutionize your HOA experience from streamlined processes to advanced features.

 

HOW THE FUTURE COLLECTS

Axela Technologies is dedicated to helping create streamlined accounts receivable and collections tools for management companies, condo and homeowners associations and others in the real estate industry.

Our proven collection tools help community associations realize higher returns and lower delinquency ratings.

Axela is not a debt collector. But, our team understands collections and has expertise in the real estate accounts receivable space. Axela licenses its software to specially-selected third-party collection agencies who emphasize a culture of debtor choice and empowerment and compliance with applicable law, including the Fair Debt Collection Practices Act (FDCPA), Fair Credit Reporting Act (FCRA), Telephone Consumer Protection Act (TCPA).

Our focus is on building tools that assist community association capital recovery. Our team of developers is constantly working to build new and improved technologies to ease and speed up the collections process.

Integrates with your Accounting Platform

In order for Condo and HOA collections to be successful, action must be taken quickly, and information must be accurate. Our tools integrate with various accounting software to gather the data required to begin a collections file.

Accurate, Up to the Minute Records

Using Axela’s software, you can effortlessly gather thousands of data points from our integration partners to have a complete picture of what position a delinquent unit and its owner are in.

The tools available in Axela’s toolbox range from calculating the value of a property, to determining if it’s in an equity position, to assistance in locating a unit owner and determining their financial position.

Respectful Treatment of Homeowners

We empower the engagement of your HOA members in a respectful manner to resolve your cash flow issues. When owners are not paying their assessments you need a HOA collection solution NOT a lawyer.

Committed to Condo & HOA Collections Technology and Advancement

An HOA collection agency must use an FDCPA-compliant process, first and foremost. But our exclusive focus on Community Associations and Management Companies makes us go deeper than the basic requirements when designing collections tools.

Our team has years of experience in the industry, from directly managing condos and HOAs, to serving on boards, to working with other industry vendors.

We work constantly to cultivate relationships in the industry so you can benefit from technologies built to suit your specific needs.


 Axela’s platform can easily review your delinquency issues and provide a customized collections plan.

We help recover funds utilizing information acquired from your association, third-party data aggregators, and credit reporting agencies.

We will refer you to highly trained and accredited collectors who work respectfully with your association members to resolve delinquencies as quickly as possible.

Call Us
 305-392-0389

Technical Support
 support@axela-tech.com

Sales & General Inquiries
 admin@axela-tech.com

 

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HOW TO COLLECT WHAT’S DUE?  By Eric Glazer, Esq.

HOW TO COLLECT WHAT’S DUE? By Eric Glazer, Esq.

We are already starting to see an uptick in the amount of owners falling behind on paying their assessments to their association.  It is wise for an association to know how the collections process works in for the board to put in place a policy that works best for the association.

In both condos, Co-ops, and HOAs, the procedure is the same.

  1. To start, the association must first deliver a thirty day written notice of late assessments to the unit owner which specifies the amount owed the association and provides the unit owner an opportunity to pay the amount owed without the assessment of attorney fees.
  2. If the owner fails to bring their account current, the association must then provide the delinquent unit owner with another letter which is a 45 day notice of its intent to file a lien and its intent to foreclose its lien. The association can demand attorney’s fees, interest and late fees in this letter.
  3. If the owner fails to bring their account current, the attorney can record a lien and threaten to foreclose on the lien if their account is not brought current within 45 days.  The association can demand attorney’s fees, interest and late fees in this letter.
  4. If after 45 days the owner still fails to bring their account current, the association may file a foreclosure action in court.

Keep in mind that because the unit owner must receive a 30 day letter, a 45 day letter and another 45 day letter, it takes a long time to bring a delinquent owner into court.  That is why associations may need to rethink their collection process and start it a little earlier.  If not, by the time it gets to court, the owner may by 9 or 10 months delinquent.

Especially in condominium buildings, things are about to get tough.  There are now mandatory inspections, mandatory repairs, mandatory fire sprinkler or ELSS installation, a tremendous rise in insurance and the inability to waive reserves.  Stay on top of your collections.


About HOA & Condo Blog

Read other industry Legal Articles

Eric Glazer

Eric Glazer graduated from the University of Miami School of Law in 1992 after receiving a B.A. from NYU. He has practiced community association law for three decades and is the owner of Glazer and Sachs, P.A. a five attorney law firm with offices in Fort Lauderdale and Orlando.

Eric is Board Certified by The Florida Bar in Condominium and Planned Development Law.

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Playing The HOA – A Continuing Study in Audacity (Part II) by Axela Tech.

Playing The HOA – A Continuing Study in Audacity (Part II) by Axela Tech.

  • Posted: Oct 22, 2023
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🏡✨ Calling all condo residents and property managers! 📣

Have you ever wondered how the fate of an entire community can change in the blink of an eye?

Chinese investors purchased properties in a condominium, sparking hope and excitement. However, the developer defaulted on agreements, pushing the property into financial turmoil. 📉💼

What made matters even more complex was that at least 75% of the units were owned by foreign investors residing in China, where they had no idea they owed any maintenance fees!

The delinquency rate became a looming problem for the entire community.

Our latest blog discusses how Axela stepped in to help a struggling condo get back on track with its delinquencies.

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Is Your HOA Ready to File a Lien? Remember These 3 Do’s and Don’ts by Mitch Drimmer

Is Your HOA Ready to File a Lien? Remember These 3 Do’s and Don’ts by Mitch Drimmer

  • Posted: Oct 04, 2023
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Is Your HOA Ready to File a Lien? Remember These 3 Do’s and Don’ts

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

 

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