Moving into a homeowners association (HOA) or condo owners association (COA) comes with the necessity to pay assessments and fees. While most home and condo owners pay these assessments when they are due, inevitably, some are not willing or able to do so on time and must be referred to collections.
Since assessments are associations’ main source of income and are required to build mandated reserves, the State of Florida provides associations with significant legal remedies when collecting money from their members. These remedies include the ability to place a lien on the owner’s property, charge interest and fines and then, in cases of prolonged delinquency, foreclose on the property to collect amounts due..
With these enhanced legal powers comes responsibility in the form of compliance. For example, Florida Statutes 720.3085(4) and (5) state that an HOA must provide a delinquent homeowner with a written notice prior to filing a lien or pursuing a civil action in court.
HOA/COA Collections Policies
It is recommended that associations have detailed collections policies written into their governing documents. A good collections policy would outline when assessments are due, at what point they become overdue and when they would be considered delinquent. In addition, a well-written collections policy would define late fees including when and how they are used, explain how escalation of a collections case occurs, describe notices and identify any third-party vendors that would be used in the collections process
Associations with written collections policies are likely to avoid accusations of harassment, uneven enforcement and non-compliance. This is because individual board members can more easily follow procedures that are outlined in an official written document. Furthermore, HOA and COA members can read the document themselves and know that the actions being taken are standard practices to which all delinquent payers are equally subject.
Notices of Delinquency
In Florida, HOAs and COAs are required to deliver, by first-class mail, a 30-day “Notice of Delinquent Assessment” to owners who are behind on their assessment payments. Then, the association is required to hold any fee-incurring collections or legal actions until after the 30-day period expires.
“Associations with written collections policies are likely to avoid accusations of harassment, uneven enforcement and non-compliance.”
Fees and Interest
The state of Florida allows HOAs and COAs to charge fines, late fees and interest as long as such charges are consistent with parameters outlined by the state’s HOA and COA statutes and the association’s governing documents. For example, the state’s statutory interest rate is 18% and late fees are statutorily set at $25 or 5% of the past-due payment, whichever is greater. Both of these can be found in Florida Statutes 720.3085(3).
HOAs often refer past due accounts to third party such as a collection agency or law firm. These third parties are governed by the federal Fair Debt Collections Practices Act (“FDCPA,”) which outlines the processes that third parties can use to contact debtors to collect unpaid debt.
These rules of engagement are defined in 15 U.S.C. §1692 and include what an debt collector’s initial demand letter and any verbal communication must include in order to be considered fair to the consumer. Other stipulations of the act include but are not limited to:
- Directly communicating with a debtor who is known to be represented by a lawyer
- Misrepresentation of the nature of the debt owed
- Threatening to take action that cannot legally be taken
- Violations for FDCPA can result in fines and civil penalties.
It is important to note that while attempts to collect HOA fees by third parties is regulated by the FDCPA, the federal act typically does not apply to HOAs and COAs collecting their own debts.
As mentioned earlier, associations in Florida and other states may place a lien on a homeowner’s property in order to collect a delinquent debt owed. Assessment liens automatically become attached to the property when the debt becomes delinquent. HOAs and COAs must formally take action to record a notice of the lien by applying to the county where the property is locard and adding the lien to the land records.
This step is said to “perfect” the lien, meaning that after it has been recorded with the county, the association’s lien will come up in title searches made on the property in question. Any transaction involving the property, including a sale to a third party or a refinance of the mortgage by a bank, will typically require that the lien be paid first. Associations can later “enforce” a lien by foreclosing on a house or condo.
Among other stipulations, Florida associations are also required to wait 45 days before placing a lien on a property and an additional 45 days before foreclosing on a property.
The Importance of an Experienced Association Attorney
HOAs, COAs and members who are locked in payment-related disputes are involved with a complex and legally regulated process. Rather than “going it alone” having an experienced local Florida attorney who specializes in HOA law can make a positive difference in the outcomes. This is especially true if the opposing side is using legal counsel as an advisor or debt collector.
South Florida Law
As South Florida’s go-to law firm for HOA and COA related matters, South Florida Law PLLC has the resources and experience to reduce and manage the liability of associations through proactive measures. We draft associations’ delinquency policies to help associations and their members avoid disputes. However, should payment disputes occur, we represent both associations and members of associations. We help our clients by defending their rights according to Federal law, Florida Statute, local regulations and the governing documents of their community.
With offices in Hallandale Beach and Hollywood in Broward County and Coral Gables in Miami-Dade County we serve all of South Florida, home to one of the nation’s highest concentrations of communities run by associations.
If you are involved in a security-related matter involving an HOA or COA, reach out to us via our contact form or by calling (954) 900-8885.