I recently spoke on the topic of Collection Minefields at the last two NC Community Association Institute (CAI) Law Days. Both sessions were very well attended and the participants came with many great and pointed questions. That tells me that both Board members and mangers are acutely aware that collecting unpaid assessments is a vital part of running a successful community association. Unfortunately, while we would hope all owners would dutifully pay their assessments, very few associations are lucky enough to escape the reality of having pursue their neighbors for delinquencies.
There are many different types of minefields that can present themselves in a collection case. Some are simply items that might delay the ability to collect, and some are unforced errors that might make collecting all, or a portion of delinquent amounts owed extremely difficult, if not impossible. Below are a few tips to help avoid these minefields and which will aid in an association’s collection efforts. (While some of these are North Carolina specific, many also apply in South Carolina–but speak to one of our assessment collection attorneys or another attorney before taking any action!)
- Properly identify amounts due on account ledgers. So what does this mean? Identify that a line item is an assessment, special assessment, or fine. If it is a fine, give enough detail that someone reading the ledger would know the purpose of the fine. The goal is to make sure that a debtor, and the Clerk of Court or Judge, understand what amounts are being sought for collection.
- Know all owner addresses. Both the North Carolina Planned Community Act and Condominium Act require that prior to filing a lien, the association must mail a statement of the amount due to the physical address of the lot and the lot owner’s address of record with the association, and if different, to the address for the lot owner shown on the county tax records for the lot. At a minimum, associations should be using these addresses when engaging in collection correspondence. If an association is aware of other addresses for an owner, they would be wise to use those as well.
- Follow the proper process when imposing fines. Previously, I wrote a blog regarding the North Carolina fine process for community associations, and noted some common mistakes. In North Carolina, there are very specific statutory procedures for imposing fines. Failing to follow those requirements can completely invalidate fines on an account.
- Notify your association attorney immediately when an owner is in bankruptcy. Filing for bankruptcy is a Constitutional right that we all have as United States citizens. Bankruptcy affords debtors certain protections from collection activities. There are strict filing deadlines for creditors trying to prove they have claims against a debtor. If an association wants a chance at being able to collect any portion of assessments owed while a debtor is in bankruptcy, it is important that your attorney be aware and involved as soon as possible.
At Black, Slaughter, and Black, P.A., we have an extensive community association collection practice. We have seen what it takes to lead to a successful collection case, and unfortunately, we have seen the pitfalls that can make collection efforts significantly more difficult. If your association needs collection assistance, please call one of the community association attorneys at Black, Slaughter and Black, P.A.