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Why Money Judgments Don’t Work for Assessment – by Mitch Drimmer

Why Money Judgments Don’t Work for Assessment – by Mitch Drimmer

Why Money Judgments Don’t Work for Assessment

Mitch Drimmer of AXELA-TECH

Money judgments are not an effective way for an HOA to collect delinquencies. It’s often more effective for an HOA to work with delinquent homeowners to find a resolution that is mutually beneficial. This may involve setting up a payment plan or finding alternative ways to resolve the delinquency.

Foreclosure is a legal process in which an HOA takes possession of a delinquent owner’s property. The HOA then sells it to recover the money owed. While foreclosure should be a last resort for collecting past-due assessments, pursuing a foreclosure may be a better option than seeking a money judgment. Here’s why:

  1. Why get a judgment on a secured debt? The property is the collateral. Why get a money judgment and then go to court again to get a writ to collect?
  1. Recovery: Ever try to garnish wages or repossess assets to collect on a judgment? It’s not easy. People can, and often do, evade efforts to collect. You already have the best collateral for the debt – the property itself.
  2. Difficulty in enforcing judgments: Obtaining a judgment is only the first step in the collection process. The HOA must then take steps to enforce the judgment, which can be time-consuming and costly. This may involve garnishing wages, levying bank accounts, or seizing assets. When it comes to collecting,  you are on your own.
  3. Limited recovery: Even if a judgment is obtained, there’s no guarantee that the delinquent homeowner will be able to pay the amount owed. If the homeowner is unable to pay, the HOA may not be able to recover the full amount of the judgment.  The money spent to get the judgment was wasted. Negative impact on community: Pursuing a judgment against a delinquent homeowner may create tension and conflict within the community. This can be more difficult in a small community where residents may have close personal relationships. If the community has an ongoing wage garnishment on a resident, the animosity may drag on for years.

The overwhelming majority of the time, owners facing foreclosure pay before a sale occurs.  Foreclosure is the end of the road for the owner, and they almost always find the money to pay to stay in their homes. Starting a foreclosure does not mean the sale will occur, and from our experience, it seldom does.

Want some more reasons why foreclosure, while still a last resort, is better than a judgment?

  1. Stronger legal remedy: A foreclosure is a stronger legal remedy than a money judgment because it allows the HOA to take possession of the property and sell it to recover the unpaid assessments. A money judgment is a court order requiring the homeowner to pay the amount owed, but the HOA must still take extra steps to enforce the judgment and collect the funds.
  2. Quicker resolution: Foreclosure can be a quicker process than seeking a money judgment. It’s unusual for the foreclosure process to take more than a year, and in some states, that time is less than half. In contrast, obtaining a money judgment can be a lengthy process that may involve multiple court hearings and appeals.
  3. Higher recovery rate: Foreclosure is better for the HOA because the sale of the property can often cover the unpaid assessments, legal fees, and other costs associated with the foreclosure process. With a money judgment, the HOA may not be able to recover the full amount owed, and this is guaranteed if the homeowner is unable to pay.
  4. It’s a deterrent: Foreclosure may deter others in the community from defaulting on their assessments. This can help to keep the HOA financially stable and protect the value of the community.

Delinquencies are often settled when a new buyer purchases the property under “joint and several liability” doctrines. If you have eviscerated an amount of the debt and turned it into a personal obligation, it’s more difficult to collect when the property sells. The association has a judgment but must still work to collect on it even if the owner sells the property, when it could have been paid in full at the time of the sale.

During the real estate meltdown of 2008, associations foreclosed and took title to units that were underwater because everything was underwater. Then, they would refurbish and rent the units. The banks were not foreclosing, the units were underwater, and the associations had no choice if they wanted to be proactive. But times have changed, and there’s a record amount of equity in the housing market. The chances that the association will ever take title in these times of high property value and opt to rent the property are incredibly slim.

If you go after somebody with a money judgment, they will evade you until they cannot. It can take years before you get to cash in, if ever. This is not about revenge; it’s about cash flow. When an HOA goes after a delinquent owner, you can be sure that the debtor would be more motivated to pay with a foreclosure over their head than a money judgment. A foreclosure is hard to get out of, if the HOA does it right. They may be able to circumvent or have exemptions not to pay a judgment.

It’s important to note that foreclosure is a last resort for collecting assessments. Before foreclosing, the HOA should work with a specialized and licensed collections solution like Axela-Technologies. Our services include client outreach, respectful phone calls, emails, mailed letters and notices, bank notifications, credit bureau reporting, and other legal and fair methods to collect. For a no obligation collections analysis, please Click Here and let us show you “How the Future Collects.”

 

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Is Your HOA or Condo Board Doing A Good Job?

Is Your HOA or Condo Board Doing A Good Job?

Is Your HOA or Condo Board Doing A Good Job?

How Can You Tell If Your Board is Doing a Good Job?

There’s a lot of talk in the media and online about bad Boards of Directors, including our recent article on how to tell if your Board is stealing from the association. But how do you tell if the Board of your Condo or HOA is doing a good job? Not all Boards are bad, right?

The truth is, most Board members are honest people that meant well when they campaigned for election and mean well when they attend and vote in each meeting. They have reasons for making the unpopular decision that the residents complain about. Oftentimes those reasons are valid and the unpopular decision was actually the lesser of two evils. But, how do you know for sure?

What Makes a Board of Directors “Good”?

To find out what HOA managers and management company executives thought was the ultimate sign of a good Board, we conducted a survey on LinkedIn. The survey responses were almost tied. It turns out, there isn’t one ultimate sign. Instead of one thing that makes your Board great, there’s a list of things that make your Board of Directors successful… or not.

Financial Responsibility

The most popular survey response with 33% of the vote, having a well-funded budget and reserves is a hallmark of a good Board. But other factors go into good financial management as well. A good Board is honest when spending HOA funds and uses them for the good of the community. They communicate with the membership about the reasons for budget increases, how they are using the money collected, and what the process is for paying vendors and for dealing with homeowners who aren’t paying on time. Big projects are well-researched and planned to limit unexpected expenses that make special assessments more likely. Speaking of special assessments, good boards know that regular dues increases that keep up with inflation are a better way to fund projects than special assessments.

Proactive Maintenance of Facilities

Coming in at 29% of the vote is proactive maintenance of the facilities. This means little to no deferred maintenance in the community. All buildings, parks, equipment, etc. are inspected often. Preventative maintenance is completed because the Board knows it will save money in the long run. When something needs repair or replacing, it’s completed as soon as possible, because the longer it waits, the more it costs. What good does it do to have a well-funded budget if money is never spent on maintaining the physical assets of the community?

Productive, Peaceful Meetings

Tied with maintenance at 29%, some managers and executives felt that the number one sign of a good board is how it feels to attend their meetings. Good Boards can disagree without slipping into childish or inappropriate behavior. They read the packets and reports that management provides them before the meeting and show up prepared to vote. Members feel comfortable attending meetings, and because the Board sets a good example of how to behave, most of the members follow it.

Good Boards Set Goals

Another sign of a good Board is goal setting. It’s hard to steer a ship if you don’t know where it’s headed. A Board that plans ahead and sets goals for the direction the community should head in is a Board that has a better chance of getting there. A Board that doesn’t plan is going to find itself spinning around in circles.

Fair Collections

People might not like to talk about it because it can be emotionally uncomfortable, but to be good at their job the Board must do something about owners that don’t pay their dues. It’s not fair to the owners that do pay to have to carry the burden of those that don’t. But a good Board is not overly aggressive when it comes to collections. They make sure that the collection solution they use is fair, not predatory, and advocates for the association to collect every possible penny.

The Good Board Checklist

Do you want to grade the Board of Directors for your community to see how good or bad of a job they’re doing? Using the following checklist, give your Board 5 points for every answer that you checked “yes”.

  • Increases to assessments are small and regular
  • The budget, reserve study, annual review, and other financial reports are accessible to the members for review
  • Reserve funding levels are above 80%
  • Special assessments are rare
  • The final cost for projects is usually in line with the projected cost
  • Components are inspected often and repaired as needed
  • When components fail, they are replaced and not abandoned or removed
  • The Board behaves like professionals at meetings even when they disagree
  • Meetings are business-oriented and not popularity contests or social hours
  • Members are welcome and feel comfortable attending meetings
  • A goal-setting discussion happens at least once a year
  • Experts are consulted and their advice is considered when making decisions
  • The number of owners that are late on their dues is less than 10%
  • Collection practices are fair and judgments and foreclosures are a last resort
  • The Board uses a professional collection solution instead of doing it themselves

Now, add up those scores and see how the Board did. A great score is 60-75, a good score is 45-60, an average score is 30-45, a Board that scores 15-30 needs improvement, and if the Board scored less than 15 points you might be in trouble.

Even good Boards of Directors sometimes find that their collections could be improved. Contact us today to find out why Axela Technologies is a better collection solution than your attorney, and learn more about our options for helping you recover late payments from delinquent  owners.

 

By, Dee A. Rowe, Guest Writer

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Condo and HOA Lien Foreclosures…A National Shame by Mitch Drimmer / Axela Technologies

Condo and HOA Lien Foreclosures…A National Shame by Mitch Drimmer / Axela Technologies

  • Posted: Dec 18, 2022
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How many times have you read a story about an HOA foreclosing on some unfortunate family for a fraction of the value of the home? For example, the veteran who, upon returning from active duty, finds that his HOA has foreclosed and taken title to his house for a mere pittance? “Soldier in Iraq Loses Home Over $800 Debt” reads the story, and life goes on at the HOA.

Should the HOA have foreclosed on this person’s house? Why did they foreclose on this property? What could have been done to prevent this gross injustice from happening in the first place? Condo and HOA lien foreclosures should not be the first go-to solution when a unit becomes delinquent.

For too long, community associations have been a national disgrace, rather than a source of national pride. No HOA wants their name to be mentioned on the nightly news because we all know it is far more likely to be an exposé than a feel-good piece. But if we want the bad press to stop, we need to take a good, hard look in the mirror.

 

Communities Often Jump Straight to the Nuclear Option of Lien Foreclosure. Can They Do That?

When you buy a house or condo in a community association, most likely you’ve taken out a mortgage, and if you don’t pay your mortgage, the lender has the right to foreclose and force a public sale of the property. So too can condominiums and homeowner’s associations foreclose on your property for non-payment of maintenance fees.

In fact, per most state laws, your homeowner’s association or condominium association can potentially foreclose on your property even if you are current with your mortgage. Also, your mortgage will remain in first position and the HOA cannot sell the property with marketable title unless the first position lien has been satisfied.

All that is required is for the association to cause an attorney to file a lien, have the attorney send a notice of foreclosure, have your day in court, and before you know it you are being evicted from your home that may have equity in it because you were delinquent for a much smaller amount than what the property is worth. Not a good deal for you and certainly not a smart business move for the association.

It’s not to say that the community is in the wrong. The assessment fees are rightfully owed to the association, and they have the right to attempt to collect it. However, jumping to the nuclear option prior to attempting diplomacy (negotiating with the owner to satisfy the debt) never goes well for anyone.

 

Winrose vs Hale ‘Shocked the Conscience’ of the Court

In an appeals court decision in Supreme Court South Carolina, the association foreclosure was REVERSED and REMANDED. In the case of WINROSE HOA v. DEVERY HALE the court was shocked by this action and even stated so in their decision: “As a result, in determining whether the purchase price was grossly inadequate …. the bid shocks the conscience of the court.” The story is quite simple and may sound familiar to you as this happens every day and really should not.

The Hales were solid citizens who purchased their home twenty-one years ago for $104,250.00 and paid their mortgage and fees on time. The home is valued at $128,000.00 and the property has $60,000.00 of equity in it. After missing a $250.00 maintenance fee payment the HOA foreclosed on their $566.41 lien (to satisfy delinquent assessments and interest) and the winning bid on the house was $3,036.00. The Hales had been robbed, and the association had acted too rashly in moving to foreclose upon a house for such a pittance. The buyer was Regime Solutions, LLC who are investors that seek out and purchase properties at foreclosures.

Due to the Hales failure to file a responsive pleading to the foreclosure complaint, a huge mistake on their part, they were ultimately defaulted and were not served with any further court papers. In fact, they did not even receive a copy of the judgment of foreclosure. When they found out they were at risk of losing their property, they tried to make good to redeem their house and paid a bill to the master and in fact, the law firm representing the HOA sent the Hales a notice that the lien had been satisfied. The HOA, however, did not withdraw its suit.

Three months after, the HOA filed the affidavit of default and the master authorized a judicial sale of the property at public auction. The Hales were not notified of this order due to a rule in South Carolina, which essentially states the time to appeal doesn’t change, despite lack of notice (rule 77(d), SCRCP). Two weeks later without notice to the Hales, the property was sold and the new owner moved to evict them. This of course led to court complaints, a trial, and finally an appeal before the Supreme Court who reversed and remanded the foreclosure order saying that the sale at auction for $3,036.00 “shocked the conscience of the court,” which is quite strong language from the Supreme Court.

 

Investors Use Shady Business Practices To Take Advantage of Unsuspecting Homeowners through HOA foreclosures

It came to light that Regime’s business model was not to assume the senior mortgage to own the property but to give back the property to the original owners at a hefty fee. (Sadly, this is not an uncommon practice.)

The court decision went on to say: “While the HOA had the legal right to pursue collection of the debt owed, including foreclosure of the Property to satisfy that debt, this foreclosure action quickly morphed into a proxy to capitalize on a small debt. We are especially troubled by Regime’s participation in a foreclosure proceeding to accommodate its business model of leveraging a nominal debt to secure an exorbitant return from homeowners who fear the prospect of eviction.”

Most important the court stated: “Regime would not have had an opportunity to engage in its questionable business practices had the HOA and its attorney not chosen to pursue foreclosure in the first place. The Hales were minimally in arrears on their HOA dues, yet the HOA foreclosed on a $128,000 home in its eagerness to collect the outstanding $250—an overdue amount less than 0.2% of the fair market value of the home, notwithstanding the amount of the outstanding mortgage.”

Finally, the court opined: “A foreclosure proceeding is a last resort, not a business model to be swiftly invoked for the purpose of exploiting property owners. We do not countenance the improper use of foreclosure proceedings by the HOA, its attorney, or Regime.”

Justice ultimately prevailed in this case, and the Hales kept their house and were not evicted although there can be no doubt that they had suffered and worried throughout this entire process. Not every homeowner who goes through this process is so lucky to get away with only a terrible story to tell.

 

Communities Are Getting Bad Advice, and It’s Costing Them, in Real Dollars and in Reputation

What went wrong is an amazingly simple question to answer. The association was convinced that they should foreclose on a delinquent unit before they even tried to engage the owners to review the consequences of their situation. While it may be true that they received one notice, they were advised by an attorney that the matter had been resolved. This was a total failure of communication.

The association could have had more contact with the owners and advised them as to the course of action that was being taken against them. Nobody said anything to them – and in this industry, such a thing is not uncommon.

When a delinquent unit goes over to an attorney the object is to “enforce the security interest” and not to collect. The association’s board was not properly informed that less drastic action could be taken. Somehow the board was convinced not to recover money from the Hales but rather to take the property.

No collections activity is reported in the narrative that is presented in the case. It was a bad business decision because eventually, the association had to pay a lot of legal fees. This situation could have been resolved much more easily and cost-effectively.

 

A Lawyer Who is Just Enforcing Security Interests Is Not A Debt Collector

This matter did not have to be resolved by a “legal solution” but rather by a “collections solution.” As a matter of fact, in a case decided by the Supreme Court of The United States, DENNIS OBDUSKEY v. McCARTHY & HOLTHUS LLP the Court held, “A business engaged in no more than the enforcement of security interests is not a “debt collector” under the FDCPA, 1032*1032 except for the limited purpose of § 1692f(6). Pp. 1035-1040.” This means that the association did not even try to collect the past due debt and if they used an attorney, he/she is not even bound by the Fair Debt Collections Practices Act.

The Supreme Court in South Carolina in all its wisdom said loud and clear: “A foreclosure proceeding is a last resort”

 

Community Associations Have a Better Option to Collect Delinquent Fees

So how should a community association collect delinquent fees? In a way this question just about answers itself. The answer is that they use a collection agency that is specialized in collections for community associations. Community Associations need to COLLECT, not foreclose and evict owners from their homes. Associations need to have adequate cash flows and a minimum amount of legal cases.

Axela Technologies would be honored to be that company for your community association. We are a licensed collection agency and we only work on delinquencies from Condos and HOAs. We are different because our objective is not to foreclose on a house, which is the action of last resort.

What Axela does is engage the owner and work with them to pay their past due assessments. Axela will send demand letters, provide internet portals to delinquent owners, make outbound calls, report delinquencies to credit bureaus, receive inbound calls, work out payment plans, and notice mortgage holders that the borrower is delinquent on their maintenance fee payments as per the PUD Rider.

Now is the time for your community association management company and/or community association to put the right process into place when you are confronted with delinquencies. Foreclosing and evicting does not have to be the way. Click here to request your free, no-obligation collections analysis today.

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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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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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