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The Truth About HOA Bank Foreclosure, by Mitch Drimmer

The Truth About HOA Bank Foreclosure, by Mitch Drimmer

The Truth About HOA Bank Foreclosure

Mitch Drimmer

This subject is very painful. We see it all too often in the HOA delinquency and collection world. And yet, it is not hopeless.

It is hard for a community to have to write off amounts that were left owing from a bank foreclosure in your community association. If you are in a super lien state, upon an HOA bank foreclosure, lending institutions will throw you a few bucks for your trouble. If an owner was foreclosed upon in a super lien state, don’t expect more than 6 months’ worth of assessments (it varies between states, but six months is the average).

It’s a pittance! And what makes it worse is that the banks are often unconcerned about speed when foreclosing–especially when dealing with a non-performing unit. Is a super lien amount enough to satisfy your association’s needs? I think not.

Communities will wonder: does my association have to write off the balance owed?

But that isn’t the question you should be asking. Instead, you need to focus all of your attention on recovering that money.

Was It Really an HOA Bank Foreclosure?

When the bank foreclosed, did they take title, or did they sell the property to a third-party purchaser?

This is a critical question. The answer can make all the difference between getting nothing or getting everything–and I mean every dime that was owed when the bank foreclosed.

In state statutes (and most likely in your governing documents) there is the concept of “Joint and Several Liability.” This doctrine makes it possible for community associations to exist, in that if I sell a property and owe the association money that obligation rides along and is the responsibility of a new purchaser.

With that in mind, when a bank forecloses and the unit is purchased, it is important to determine who was on the chain of title. If the bank foreclosed and sold the unit before they took title, then the association’s lien was not extinguished. This was not a foreclosure where the bank could hide behind their lien priority. THIS WAS A SALE.

Because it was a sale, the association is entitled to recover every penny. When Axela Technologies is servicing a debt, we do not depend on the lender to be an honest agent. This is an arm’s length transaction, and although the association is not a buyer or a seller in this deal, they do have money at stake and require professional representation (that does not cost $350 an hour) that has their interests at heart.

When a bank forecloses, look and see if they had title and sold it, or sold it post-judgment. If they did not take title, this is the difference between a successful collection event and taking a hit (sometimes substantial).

Pursuing a Surplus From a Bank Sale

Often when a bank forecloses and takes title, they will sell their REO (Real Estate Owned Property) at auction or through standard real estate brokers. In these times of real estate appreciating at a rapid rate and inflation roaring, banks will often sell the property that they foreclosed upon for more than they are allowed to recover. That results in a foreclosure surplus, and the association (by right of the contractual lien in your governing documents) has the right to claim that surplus amount.

At Axela Technologies we do this every day because if we do not recover our fees, then we do not get paid. Unlike your attorney, we don’t tell you to write it off and send you a bill, because our interests are aligned with the association. If you have had a unit foreclosed upon and don’t know if it was sold at a surplus, then somebody is not trying hard enough to recover what is legally, rightfully, and ethically money that belongs to the association.

Post-Foreclosure Recovery From the Delinquent Owner

Let’s assume that when the HOA bank foreclosure concluded, everything was done in order and there was no surplus for the association to recover. What happens then?

Well when the bank foreclosed on that unfortunate member of your association, and they left the membership holding the bag for their delinquent assessments, the debt was not extinguished.

Let me repeat that: an owner who owes the association money before an HOA bank foreclosure STILL owes that money after they have lost their house.

Now you may be inclined to say that this was a poor unfortunate person and to pursue them is heartless. In reality, it is heartless NOT to pursue this money. You must consider the good paying owners who picked up the cash shortfall by way of increased assessments and special assessments. Choosing not to pursue that debt means they footed the bill for nothing.

Axela Technologies has a cure for that as well.

Our Post-Foreclosure recovery program allows us to pursue these debts on a contingency basis. If we recover, it is like finding $20.00 in your jeans when you pull them out of the dryer, but way better. (Note: Contingency collections are not available in Texas.)

Let Axela Technologies Help

If your community association has delinquencies, remember that they do not end with an HOA bank foreclosure, or even an association/foreclosure. It ends when the debt is either collected or determined to be absolutely, positively uncollectible. Contact Axela Technologies and speak with our knowledgeable recovery specialists. Let us help you obtain the holy grail of community association governance that is a balanced budget.

 

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HOA Statement of Receivables

HOA Statement of Receivables

HOA Statement of Receivables

A statement of receivables, or accounts receivable statement, is a document that details the outstanding charges owed to the community association. This can be from sources such as overdue dues, vendor credits, late fees, or any other outstanding source of income. It is essentially a list of every account that still owes the HOA money.

 

What is in a Statement of Receivables

These statements should contain all accounts that owe money, along with the grand total of overdue funds. The total will help with budgeting purposes. Knowing how much money is available, if collections are being handled properly, can help with financial planning. The list of all overdue accounts can act as a checklist for anyone working in collections to ensure that no account is missed.

Some associations prefer to go one step further and detail which accounts are 30 days, 60 days, and over 90 days past due. For example, if a homeowner has missed their dues in March, April, and May; they will have money in the 30, 60, and 90-day categories. This way, collections agents will know to put more pressure on collecting the April dues versus following up on another account that is only 30 days behind. Just like with all financial statements, the more detail you provide, the easier it is to plan and manage.

 

How Often Should They be Prepared

While the HOA statement of receivables should be prepared at the same frequency as all other financial statements, it is helpful for the accounts receivable statement to be released more frequently. There are even programs available to keep up with AR statements in real time and have them available on demand. This can be immensely helpful for collection purposes to make sure that everyone is on the same page.

 

Need More Information

Financial management can be one of the toughest aspects to operating a successful HOA. If you are having trouble with reviewing financial documents such as the HOA Bank Statements, contact the professionals at CSM. We have years of experience working with homeowner’s associations from all over the United States. Using state-of-the-art technology, we can provide financial management assistance while still allowing association directors to remain independent.

 

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SFPMA’s Maintaining an Condo & HOA General Ledger

SFPMA’s Maintaining an Condo & HOA General Ledger

  • Posted: Oct 31, 2022
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Maintaining an Condo & HOA General Ledger

The foundation of all  accounting is the general ledger. Much like your checkbook at home, the Condo & HOA general ledger keeps an ongoing record of all transactions made by the community association. All other financial statements such as the balance sheet, income statement, and statement of receivables are created based on the ledger.

Unlike all the other financial statements which are prepared on a monthly, quarterly, or annual basis, the general ledger should be continuously updated. Whenever a transaction is made or received, it needs to be accounted for. At any point in time, you should be able to look at the ledger and see how much money the association currently has in all accounts and where money has moved. If you need to go back and see how much the association spent on landscaping in August three years ago, you should be able to find it in the ledger records.

 

Accounting Approaches

There are three basic approaches to manage finances. There is no right method for every association. Each HOA is different and may find that one method of accounting works better for them than another.

  • Accrual – The most popular and preferred method. In an accrual approach, revenues and expenses are recorded when they are incurred instead of when money changes hands. This means that communities using this approach will need to maintain two other ledgers for payables and receivables. For example, when invoices are sent to homeowners for dues, that money is marked down in the receivables ledger. As community members pay their dues, the money in the receivables leger is moved to the general ledger. The same process is used for expenses in a payables ledger. While this may take more effort than other accounting methods, it provides much more detail.
  • Modified Accrual – A mixture of accrual and cash approaches. In modified accrual, revenues get recorded when they are earned while expenses get recorded as money changes hands. Condo & HOAs that use this approach will need a separate ledger for receivables but will document expenses as they are paid in the general ledger.
  • Cash – Transactions are documented on one ledger as money exchanges hands. This is the simplest approach but provides the least amount of detail.

Once you find the approach that works best for your community, stick with it. Switching between different approaches can make reviewing financial information in the future confusing and may hinder your board of directors’ ability to make well-informed decisions.

 

What Should be Included

Depending on the system of accounting, your HOA may have several ledgers running at all times. But no matter the approach, ledgers should include all transactions made by the community association in and out. Each account owned by the Condo & HOA should also have its own ledger. Most associations have at least an operational account and a reserve account.

Regularly checking bank statements is a good way to double check the accuracy of the general ledger. Sometimes transactions can accidentally go unreported or, in some cases, fraudulent activity may occur. Whenever you receive statements from the bank, make sure all transactions match up between them and the general ledger.

 

Need Help Maintaining an Condo & HOA General Ledger

Finances can be confusing. It is always helpful to have a professional on your side to make sure everything is being done properly. If you are having trouble keeping up with all the financial documents necessary to properly manage an HOA, call the experts at CSM. We have years of experience working with homeowner’s associations in almost every state in the US. We offer a wide variety of financial management solutions to give you all the assistance you need while still maintaining your independence.

 

Find top companies working in the Condo HOA and Management industry in Florid on our Directory!

 

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Condo Deconversion: The Good, The Bad, and the Reality

Condo Deconversion: The Good, The Bad, and the Reality

  • Posted: Oct 21, 2022
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Condo Deconversion: The Good, The Bad, and the Reality

There’s a lot of turmoil in the housing industry today, and it’s hitting community associations hard. New restrictions from Fannie and Freddie are dark clouds full of special assessments looming on the horizon, and the housing bubble is growing rapidly with no real signs of stopping, inviting investors and tempting homeowners to sell. Because of all of this, a lot of condominium associations are considering a tactic called “condo deconversion.”

A condo deconversion is basically a bulk sale and process by which all units in a condominium building are sold in one transaction to a real estate investor, who will then turn the property into rental apartments. (Its counterpart is “conversion” which is when an apartment community is converted into a condominium or co-operative and sold off. Even though the terms are connected, there’s no requirement that a condo building was previously converted in order to be deconverted.)

Deconversion might sound like an extreme option, but it’s quickly becoming a sought-after fix for communities struggling with expensive deferred maintenance issues.

Why Condo Deconversion Is Gaining Popularity

There are a lot of reasons why this trend is taking off. Those FNMA and FHLMC restrictions, for example, are about to start causing some serious problems for condo boards. Requiring that the condo buildings meet a specific level of health by withholding approval for any future purchase loans for units in the community is stressful for everyone involved, and can often only be

Buildings get old and need repairs.

Building repairs are time-consuming and costly, and only get more expensive as buildings start hitting 30 and 40 years old. Communities with underfunded reserves will likely be subjected to overwhelming special assessments to catch up on the deferred capital improvements and maintenance over the years. The current real estate market means that deconverting could offer an alternative where unit owners get out with a profit rather than pouring money into special assessment costs.

New special inspections being ordered by local municipalities, state statutes, or federal restrictions.

The condominium lobby and real estate lobby will go kicking and screaming, fighting new inspection and reserve laws. Yet eventually condominiums are going to be forced to do the right thing and keep up with maintenance, capital improvements, reserve studies, and funding. It’s the right way to govern a condominium, but very infrequently is the right way the cheap way. These new inspections will be costly and time-consuming, and will likely expose more problems that only money can solve, exposing an underfunded community for the money-pit that it has slowly become. Selling in bulk to an investor pushes that responsibility onto someone else while pocketing a bit of profit.

There aren’t enough rental properties.

Condominiums have been popular in the last 20 years but there is a tremendous supply gap in rental properties, and this is a way for real estate investors and developers to acquire properties without having to build them. With the cost of construction, it makes more sense to take an old building, even an old building with long-deferred maintenances and problems, rather than invest in wholly new construction. It saves time and allows for a far quicker return on investment. It’s a sound move to buy them out and rehab the structure.

The price of real estate has skyrocketed.

The housing market is experiencing yet another quickly-growing bubble. Condo deconversions would typically start at 9x rent roll (the cumulative value of projected monthly rents for all of the units in the building), but some communities are seeing negotiations beginning as high as 20x rent roll! As Don Corleone would say “it’s an offer they cannot refuse.” For a condominium facing a $150,000 special assessment, they may feel that it would be foolish to refuse such a lucrative offer. Why pay a special assessment when you can ride the high of the real estate bubble?

What Does Condo Deconversion Mean For Owners and Board Members?

Condo deconversion is not a cut-and-dry good or bad decision. It’s a complicated process and has pros and cons on every side.

The good is that it can offer hefty profits and a get-out-of-jail-free card in a way. For some owners, it can mean a massive profit and an incredible opportunity to escape a very expensive, long-term situation. For board members who are stuck with the neglect from previous board decisions, it can mean walking away from a series of problems for which you would have been unfairly blamed.

The downsides, however, can be drastic and dangerous for owners:

Loss of Guaranteed Residence

For some, it means being forced out of their homes, into an increasingly hostile real estate landscape with no time to accommodate a drastic life change. Some states, like Florida, are experiencing the lowest housing inventory in the state’s history, meaning some may make a fortune over what they paid for their condo unit only to have to pay that fortune forward, and then some, just to find a new roof to put over their heads. Or, they could get stuck renting the home they previously owned at a severely increased monthly payment.

Loss of Long-Term Equity For Short-Term Gains

Homeownership provides security for yourself and your future generations. For those stuck renting from their new landlord, you lose the ability to pass on equity to your heirs. Unit owners can also no longer get a loan based on mortgage equity or use their home to guarantee a large purchase or supplement legal aid.

Loss of Influence in Your Community

As a member of a community association, you have power. You have a say in every issue that the community faces. You can determine who represents you on the board. You can even run to be part of that board! By deconverting your condo association, those residents that remain forfeit their power to the new landlord. The landlord decides what will and will not be repaired, and when. Once the landlord takes control, they can raise rents as high as they want, regardless of the negotiated rent roll they purchased the property for. There is no requirement to seek approval from residents the way an association board is required to seek approval for the annual budget.

Requirements For Deconverting Your Condo Association

Depending on the state, you do not need a unanimous vote to terminate an HOA or a condominium association, so even if there are objections it can happen to most condominium associations. In Florida, for example, if an investor buys 80% of the condo units, the last 20% can be compelled to sell if the condo has been deconverted. In fact, as of 2007, 80% of owners can allow for a Florida condo deconversion if more than 10% of the total ownership did not object. Other states will have their own provisions for condo association termination, so be sure to check your state’s legislation.

Some owners may argue that the association’s board needs owner approval before it can even begin looking into the possibility of a sale. In reality, the board has a fiduciary duty to bring all the best value and opportunity to the owners they represent, meaning that they can and should be researching opportunities like deconversion if the benefit is great enough.

Can the board sell out the condominium from under the owners? No. They will still be required to get the state’s minimum approval percentage within the community. And if there are condo deconversion negotiations going on, the board has an obligation to keep the membership informed and should provide full transparency.

Revitalizing Your Condo Community

Deconversion is an enticing opportunity for condo communities facing mounting special assessments or dues increases to confront long-term deferred maintenance. And while it might be the right choice for your condo building, it is not as simple as just pushing a button and making everything disappear. It’s a decision that requires a lot of thought, due diligence, and communication with your community.

While you can’t go back in time and undo the maintenance deferment of boards past, you can do the right thing for your community today and start a conversation about the importance of building integrity and health, and how the benefits will always outweigh the cost. Your condominium building needs a diligent board of directors working for the good of the community. It requires regular maintenance, capital improvements, fully-funded reserves, good cash flow, and a proper delinquency and ethical collections solution. Call Axela to let us help you recover some of those missing funds by collecting on your delinquent assessments, and avoid deconverting your condo association.

 

How The State and Federal Government Regulates Collections by Axela Tech

How The State and Federal Government Regulates Collections by Axela Tech

How The State and Federal Government Regulates Collections

Collection Laws By State

While every state must follow federal regulations, most states have additional laws that regulate how debt collectors interact with consumers, and may also regulate collections specifically when dealing with common interest developments. Use the map below to access the complete guide to your state. We lay out the relevant laws, explain them in plain English, and answer your questions on how your state regulates community association collections.

 

Choose Your State:

AL

AK

AR

AZ

CA

CO

CT

DC

DE

FL

GA

HI

IA

ID

IL

IN

KS

KY

LA

MA

MD

ME

MI

MN

MO

MS

MT

NC

ND

NE

NH

NJ

NM

NV

NY

OH

OK

OR

PA

PR

RI

SC

SD

TN

TX

UT

VA

VT

WA

WI

WV

WY

HOA and Condo Delinquency Collection For Community Associations.

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.

Free Collections Analysis

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3 Reasons to Hire an HOA Collections Agency to Manage Your Delinquencies by Mitch Drimmer

3 Reasons to Hire an HOA Collections Agency to Manage Your Delinquencies by Mitch Drimmer

  • Posted: Sep 18, 2022
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3 Reasons to Hire an HOA Collections Agency to Manage Your Delinquencies

Mitch Drimmer 

Why Hire an HOA Collections Agency?

Community associations have limited options to collect, and the traditional method isn’t focused on collection at all, but rather on punishment. This is why an HOA collections agency may be the right choice for managing your delinquencies.

Debt collection is a troublesome topic no matter what industry you’re in, but when it comes to collecting on unpaid HOA assessments, things can get tricky. Between your community’s governing documents, state laws, and federal regulations, there are a lot of rules to follow.

On top of that, there aren’t a whole lot of options out there for community associations looking to collect on that debt. Many communities hire an HOA attorney or try to handle collections on their own.

1. Lawyers are focused on a legal resolution, not reclaiming lost funds. 

Many communities rely on HOA attorneys for legal guidance and lawsuits. For this reason, many also turn to their attorney when a homeowner has failed to make payments. Many boards still believe that their only course of action is placing a lien on the property and going to court. And your attorney won’t tell you any differently.

Your attorney’s primary function is to follow a legal process of “lien and foreclose.” The priority is seeking a resolution of an issue and seeking justice, not collecting the debt that is owed to your association. The board has a fiduciary duty to collect that money, not to pursue some form of justice against the delinquent owner, so choosing a lawyer might not be the best course of action.

2. Avoid a lawsuit.

Because collections are highly regulated, there are a LOT of laws surrounding the collections process. The Fair Debt Collection Practices Act (FDCPA) has many rules around the who, the how, and the when of collections efforts. Violating any of those rules, even by accident, can create a massive legal headache for your community. When it comes to collections, do not do this at home.

Federal laws aren’t the only ones to worry about, though. Many states have their own specific rules and requirements, also. Depending on where you reside, your state’s laws may be even stricter than the FDCPA, so following the federal law might still get you into hot water.

3. Traditional collection agencies aren’t built for HOAs.

Much like an attorney, a collection agency that isn’t tailored to handle HOAs and condo associations will look for the fastest, biggest buck they can make. Typically these companies will want to buy the debt or advance funds to you against this debt–this might sound like a great plan because at least you’re recovering something, but many governing documents (and some state laws) specify that debts must be collected at 100% of the principle that’s owed. A collection agency will not pay 100% so this is in direct violation of those rules. Getting funding to ease the pain of a cash shortfall may also be a violation of your CC&Rs.

It also creates an ethical concern–by selling off that debt, your community loses control over how the debt is collected, opening up your hurting homeowners to aggressive collections efforts. Will they operate within the confines of the FDCPA? Almost certainly. But as we’ve said before, just because it’s legal doesn’t mean it’s ethical.

Find Out Why An HOA Collections Agency Is Right For Your Community

Collecting monies owed to your association is a difficult process, but it shouldn’t also be a painful one! At Axela, we understand the importance of ethical community association debt collection, and we’ve perfected the process and technology it takes to make that happen.

 

Offer your community association clients a full suite of collection agency services without having to open your own collection agency.

By partnering with Axela, your association management company can offer comprehensive and fully compliant collections services to your clients. Axela handles the burdensome and time-consuming aspect of the collection process and puts money back into the hands of the association.

Your clients will gain all of the benefits of Axela’s suite of collection tools, while you maintain oversight and easy access to the client portal, with all of the reports, account history, and data points that Axela gathers, in real-time.

Learn More about our collection services 

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The Infinite Game in Condo Governance by Mitch Drimmer of Axela Tech.

The Infinite Game in Condo Governance by Mitch Drimmer of Axela Tech.

In 1986, Professor James P. Carse presented the concept of finite and infinite gaming. He said, “there are at least two kinds of games: finite and infinite.

A finite game is played for the purpose of winning, an infinite game for the purpose of continuing the play.” Sports games, like football and baseball, are clearly finite games. They have specified chunks of time in which one is expected to do better than the other. An infinite game has no winners and no time length. Instead, it’s just a set of rules and expectations you must continue to participate in without end.

Simon Sinek took this game theory and applied it to the planning and continued success of a business enterprise. Businesses are not time-restricted games. You don’t have a year or five or ten in which to complete some kind of final objective. Sure, there are benchmarks and points of obvious success, but there is no end to business.

Now apply that kind of thinking to the HOA and condo industry: community associations, and in particular, condo governance. A condominium should be run with an “infinite game” mentality, with the goal of the structure being maintained to reach the ripe old age of eternity. Can a structure last infinitely? Maybe not, but even so, that is how it should be governed. There is no shelf life on a condominium building.

Keeping Score in Condo Governance is Playing a Finite Game

Condominiums all too often live on a budget-to-budget basis (or a special assessment to special assessment basis) with very little regard for the future. This kind of condo governance manifests itself in an inadequate capital improvement plan or a functioning preventative maintenance protocol.

Many condominiums are run by a seat-of-the-pants mentality–the pinnacle of finite thinking. This budget-to-budget, board-to-board, manager-to-manager mentality is destructive and a clear blueprint for a condominium’s demise. It pits past, present, and future against one another, each one keeping a score of who did what and who should be responsible for what comes next. Often, this means everyone is passing the buck, and no one is actually accomplishing anything. Managers and board members need to think in terms beyond their tenure with the community and consider the far future in their planning and attitude.

Recently, we have witnessed the results of a condominium playing a finite game. Could there be a better example of misguided short-term planning than what happened in Surfside, Florida? Reports all indicated that the board of directors thought about only the short-term struggles–their time in office, the quickly-mounting immediate expenses, the inconvenience of a serious construction project–and played a finite game with disastrous consequences.

But the board is not alone in their fault. They had no direction from their law firm (which was fined $31 million dollars), which should have known better. This tragedy did not happen in a vacuum.

Sustaining Through an Infinite Game

As extreme as an example Surfside is, the thinking remains endemic. It is not an anomaly, it is only the worst-case scenario and a scenario many buildings are facing after so many years of neglectful condo governance.

It all begins with a reserve study. A quality reserve study can start the process of future planning for a condo building. Ideally, the results will physically lay out what the future may hold. It won’t be perfectly spot-on, but it is at least there as an initial guide.

This is how communities play the infinite game–a good reserve study is not a one-and-done event. A proper reserve study requires long-term maintenance and updating as inflation, and other infrastructural issues inevitably erode the previous year’s budget. Playing an infinite game in condo governance will ensure its longevity, value, comfort, and positive residential experience.

Start Playing an Infinite Game

A condominium that has a good reserves program, maintains an honest budget, pursues delinquencies, seeks out stability in management, and continues to embrace new technologies to reduce expenses is playing the infinite game.

It’s election season for boards of directors, so why not campaign on governing with an infinite mentality? Govern and manage your building like it is supposed to last forever. For more advice on condominium fiscal management and collections, contact us today.

 

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Delinquencies and collections are an unfortunate part of Condo/HOA management.  Learn how Axela can help!

Delinquencies and collections are an unfortunate part of Condo/HOA management.  Learn how Axela can help!

  • Posted: Aug 30, 2022
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How Much Should Your Community Pay for HOA Collections?

Mitch Drimmer

When an HOA or condo association experiences delinquency, they end up on a path where there aren’t a lot of options available. Not only are recovery choices limited – placing a lien on the property is just about the only recourse – but so are the kinds of professionals who can help in your recovery efforts. And of those options, most are going to have no problem charging through the nose for their services. This makes knowing how much you should pay for HOA collections difficult.

But we believe your community shouldn’t lose ANY money when it comes to collecting from delinquent homeowners.

Start From the Top

We’ve said (many times) before that HOA and condo dues are the lifeblood of a community. The money coming in from community members helps ensure that things run smoothly–that vendors like landscapers and maintenance team members get paid, that repairs are handled, and that the community is kept up and running at all times. This is why it’s crucial that every community association should have a uniform collections policy in place.

This policy should detail the finer points of your community’s delinquent dues-collection process. It’s basically a set of guidelines that tell residents not only how delinquencies will be treated, but what they can expect in terms of late fees and interest charges for unpaid dues. It’s a way to keep everyone on the same page not only about the importance of the dues to the community but the seriousness of what happens when they go unpaid.

This HOA collections policy is the number one reason why no community should lose money when trying to recover unpaid dues from delinquent homeowners.

Don’t Fall Into the Trap of Foreclosure

Your community’s uniform collections policy is the exact set of steps needed to reasonably start the collections process. Every scheduled late fee or interest charge is designed to incentivize the delinquent homeowner into paying back some, if not all, of the monies owed to the community. No one wants to watch their debt grow into something completely unmanageable, and actions like warning letters and fines are simple and free options to accomplish that goal.

But many associations believe that their best bet for recovery is to initiate foreclosure on the property. That’s completely wrong, even if your lawyer tries to tell you otherwise! Choosing to foreclose is like bringing a flamethrower to a fistfight–it might get you back some of the money your community is owed, but that’s a big “might” and it will cost you an arm and a leg in legal fees to get that measly win. And in the end, one of your neighbors is forced out of their home. Foreclosure is a terrible, desperate move that should only be used as the absolute last resort.

An HOA Collections Solution That Doesn’t Cut Into Your Principal

While your HOA collections policy should be the kick in the pants most homeowners need to pay back their debts, there are some situations where it just won’t happen. Maybe the money isn’t there, or maybe there’s more going on under the surface, but whatever the reason, that isn’t your HOA or condo association’s cue to start throwing more money at the problem.

Axela Technologies offers communities a way to recover their losses without losing out on any of the monies owed. Instead of taking fees from the unpaid HOA assessments, Axela takes our payment from the late fees and interest charges defined in the governing documents. That means even if your community chooses to use professionals to move the collections process along, you won’t lose out on any of the principal – that money your community is relying on getting.

Struggling to recover delinquent HOA or condo fees from your homeowners? Contact Axela today for your no-cost, no-risk consultation to get the collections process going. And if your community doesn’t have a uniform collections policy in place, it’s not too late to incorporate one into your community documents–our free sample uniform collections policy is a great place to start.

Axela leverages technology to substantially reduce the delinquency rate in your community associations by increasing efficiency

We Make the Collection Process Efficient<Axela Tech

Axela is a unique hybrid of a technology company and a collection agency and we focus exclusively on the community association industry. In order for collections to be successful, action must be taken quickly and information must be accurate. We integrate with various accounting software so that we can gather the data required to begin a collections file. Once we have a roster of delinquent units, we begin an intensive underwriting process. We gather thousands of data points from our integration partners to have a complete picture of what position the delinquent unit and it’s owner are in. Our processes range from calculating the value of a property, to determining if its in an equity position, to skip tracing a unit owner to locate where they are and their financial position.

 

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Community Association Collections 101: What Is a Condition Precedent? by Axela Tech.

Community Association Collections 101: What Is a Condition Precedent? by Axela Tech.

Community Association Collections 101: What Is a Condition Precedent?

Mitch Drimmer

HOA debt collection and community association management are two very highly-regulated industries. Between sweeping federal regulations like the FDCPA, state statutes dictating operational and communication requirements, local city or county rental ordinances, and of course, individual community governing documents, there is a lot of governance in the HOA and condo association world.

This abundance of legislation can make it hard for board members to know what steps they’re allowed to take (and when!) regarding HOA debt collection.

 

HOA Collections: Condition Precedent and Process

When an owner goes delinquent on their HOA dues, the community usually has a security interest and the ability to foreclose and take limited title to a property. Before they exercise the security interest, and even before they can send a unit into collections, there are specific steps that must be taken. These steps are called “Condition Precedent.”

A condition precedent is defined as “a condition or an event that must occur before a right, claim, duty, or interest arises.” In plain English, certain tasks must be completed before an anticipated action can occur (like a collection effort). You can’t take a vacation until you’ve saved up enough money, right? Same concept.

If your management team does not get the condition precedent right, then your HOA or condo association cannot send a file to collections. Period, end of story. So these are very important steps of the collections process.

 

What Condition Precedent is Needed to Send a File to Collection? 

Condition precedent can vary widely depending on what part of the country you are in and what other legal restrictions your community is under. This will mostly depend on where your HOA or condo association is located, but it can also be impacted by what your own governing documents state.

Some states require a host of steps that need to be taken before a community association can move a file to a collection agency. Some of these steps include but are not limited to:

  • The association must send a courtesy letter to a delinquent owner.
    • In some states (Colorado, for example), if the owner speaks any other language besides English, the community association is required to communicate in their language. This can be critical. It must be a good translation from English that would be acceptable in a court if necessary (so Google Translate is probably not good enough).
  • Sending a Notice of Delinquency to the delinquent owner via certified mail, return receipt requested.
    • The notice should advise the owner that they can enter into an 18-month payment plan.
    • This notice must also advise the owner regarding:
      • Unpaid assessments.
      • Unpaid fines for violations.
      • All other charges should be itemized in this notice.
      • And the association needs to advise the owner that a security interest exists, and the community exercises its right to foreclosure.
  • The association must have a Uniform Collection Policy that will review the steps that the association may take to collect the past due assessments.
  • The board must take a vote (in a closed session) before they send a unit into collections.

 

Get Help Navigating HOA Collection Condition Precedent

While this list covers many common condition precedent requirements, every state will vary. If your association misses a step, it could very well mean that you will lose any progress you’ve made and be bumped back to step one. Community association management firms should understand what their communities are expected to do legally before sending a unit into collections.

Axela Technologies has a team of experts who understand all of the condition precedent steps needed and can help educate on this exact matter. Whether you’re a management company looking to help your associations stay on track, or a board of directors seeking out HOA debt collection assistance, Axela can help.

When you are ready to recover your money, avoid the hassle and get a professional to help. Click here for a free, no-risk consultation with an Axela collections specialist.

 

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Why A Specialized Collections Company Makes Sense for Your Community Association by Axela

Why A Specialized Collections Company Makes Sense for Your Community Association by Axela

  • Posted: Jul 20, 2022
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Is a Specialized Collections Company Right for Your Association?

In good times or bad times, community associations (Condos and HOAs) will experience some level of delinquencies that affect the entire association. As a not for profit business your association depends on timely payments every pay period to maintain services to members of the association.  Failure to effectively act on a delinquent account does a disservice to the community and to the delinquent member as well.  By allowing a member to sink deeper and deeper in debt, the association only makes it more difficult for them to remedy their problem.  Engaging a Legal Process (sending the file to your community association attorney) the association may just be incurring additional expenses that eventually will be paid for by the good-paying owners.

 

Often HOA boards of directors are reluctant to migrate delinquencies to collection agencies from their community association attorney. This article looks at the key benefits and concerns regarding collection agencies for community associations, examines the current state of collections, and helps associations understand why a specialized collection agency for community associations offers tremendous opportunity to collect their money at very no cost and no risk.

The Promise of a Specialized Collections Company

Almost every community association looks towards their community association attorney to manage their delinquencies. Yet community association attorneys are not prepared to do the work necessary to effectuate collections (outbound calls, credit reporting, skip tracing, dedicated inbound call center), and the costs are usually beyond what they recover.  Collection agencies have traditionally been performance-based and will collect their fees and costs only upon a successful collection event.  Collection agencies are concerned with only one aspect of business and that is the successful and cost-effective recovery of maintenance fees and other charges that may appear on the ledger (fines & violations, special assessments).

Operational Excellence and Reporting

The most important feature of an enterprise-level collections solution is its ability to communicate with delinquent owners.  Both inbound calls and outbound calls must be managed by highly trained and accredited specialists. When seeking out a collections company for your HOA ask if there is a dedicated portal for delinquent owners to resolve their issues. Boards of Directors and their management companies need to have access to clear and legible reporting.  Payment applications must be handled according to governing documents and state statutes. Strict compliance with Federal and State consumer rules and regulations is imperative.

Cost Savings

Community Association law firms require payment regardless of the outcome of the file. These costs often are beyond the amounts recovered.  Collection Agencies are merit-based and are only paid upon a successful collection effort.  In the specialized field of collections for community associations boards of directors should not, and in some cases, cannot allow any portion of their maintenance fees to be allocated as boards must be faithful to their association’s budget.  Fees and costs of collections should be charged and passed through to delinquent owners, and in the case of an unsuccessful collection effort these fees should not become the burden of the association (including costs for filing a lien)

Concerns Regarding Collection Agencies

It’s easy to see why these key features are the motivators for moving your collections to a specialized collections company and away from a community association attorney.  Yet, many boards of directors are reluctant to change what they have traditionally done in the past, and of course, they will be advised by their own counsel not to remove a collection file from their firms.

FDCPA, TCPA, & FCRA Compliance

Any vendor who performs services for a community association must have the proper insurance to protect the association from liability.  Violations of consumer protection laws should be a great concern.

  • Know and be in compliant with Federal and State Regulations.
  • Report delinquencies to credit bureaus in compliance with the FCRA.
  • Ensure all telephone calls are following TCPA regulations.

A community association must perform their due diligence and be sure that their collection agency is not only bonded but properly insured.  Associations should also be concerned that the customer service representatives of the collection agency are professionally trained and have designations from collection industry trade organizations such as ACA (The Association of Credit and Collection Professionals).

Statutes & Governing Documents (CC&Rs)

Of significant concern to community associations should be a collection agency’s adherence to governing documents and state statutes that relate to condos and HOAs.  Payment application, timelines, statutory compliance to the lien process, and notification are of paramount concern to community associations, especially regarding collections.  Zero defect execution of the collections process must be the standard practice. Collection agencies need to:

  • Perform flawless underwriting of each ledger.
  • Verify property ownership.
  • Impeccably review governing documents and by-laws and understand the state statutes where they are doing collections.

Conclusion

With increased scrutiny of the collection industry, it is more important than ever for community associations to engage the right company with the most sophisticated technology that can support their missions.  They should:

  • Compare and document standards, guarantees, and performance levels to ensure that prospective collection agencies are truly best-in-class solution providers.
  • Ask for collection agency references and connect with these references to get a true feel for the providers’ service, product and

It is also imperative that community associations increase efficiency, transparency, and reporting to members of the community.  Collection Agencies that specialize in working with community associations are the best way to go.  The right collection agency just makes sense for communities – Do not allow delinquencies to erode your community.

About Axela Technologies

Axela Technologies is a licensed collection agency exclusively serving community associations in the United States.  Axela Technologies realizes that in the field of collections, community associations have been an under-served industry.  By offering their core product Easy Collect ™ to community associations Axela Technologies has recovered millions of dollars that community associations might have otherwise written off. Give Axela a call today and get a free no-obligation collections analysis today to see if a specialized collections company is right for your association.

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