Answers: A Board’s Responsibilities in Dealing with Delinquent Owners

by Richard White / Published January 2015

QDelinquent
Owners

Our condominium association treasurer is writing off most of our delinquent owners as “highly unlikely to ever pay maintenance fees.” Is this legal? I do not believe that any owners’ delinquencies should be forgiven through a bad debt allowance. Some of these owners are still living at our condominium in their units, have paid off their mortgages, and are defaulting every month on maintenance fees. The collections attorney who has filed liens against some of these owners is ineffectual, and the cases have been dragging on in the courts for years. It was my belief that receivables could be special assessed and, unfortunately, paying owners would have to pay for those who do not pay. But our board of directors has apparently opted to just allocate most of the non-paying units into “Bad Debt Allowance.” I don’t think the bad debt allowance category was created for defaulting owners. We have to balance our budget and cannot do this unless delinquent owners pay or unless the association levies a special assessment. 

LG, Miami

AFrom the information provided in your question, it appears that your board does not understand their responsibilities in dealing with delinquent owners. In addition, if your attorney is only filing liens, then you need a new attorney. There’s one problem in my answer (to follow) and that is if you do not have collection activities for one year on a delinquent owner, then the board cannot collect delinquent accounts. My recommendation requires the board to establish a delinquency collection policy. That policy should be reviewed by a qualified, association attorney. That policy would require that any owner that does not pay on time receives a collection letter when the unit is 10 days delinquent. Additional letters would be sent when the account is 30 days delinquent and a certified final letter would be sent when the account is 40 days delinquent. If the owner does not pay, the matter needs to be turned over to an attorney to file a lien. If the lien is not paid within 30–60 days, the attorney should be instructed to start foreclosure. If it is properly filed, then the courts should have a final foreclosure notice in 60–90 days. If your board or your attorney is sitting on the paperwork any longer, I consider them negligent in their duties. The board does not have a right to simply allow an owner to not pay their maintenance fees, and thus a bad debt write-off is highly improper. A special assessment against delinquent owners to collect back fees is not a proper way of collecting fees owed. It may be time for your board to seek information on their responsibilities and engage professionals to help.

QDirectors Responsibility
and Duties

Condominium owners installed patio blocks outside their lanai at the rear of their condominium unit on what is considered to be a common element. The owners stated they had prior permission to install the patio blocks. In the absence of the owners providing any documented evidence of permission, a previous board requested that the patio blocks be removed. The blocks were removed. The following year the owners of the condominium unit ran for the board and were elected to two of the three board positions (they own two units so although they were husband and wife they were eligible to serve on the board). After being elected to the board, a motion was made by them that they are allowed to install patio blocks outside their lanai. Both of them voted in favor of the installation. Did the board act within their authority by allowing the installation of the patio on what is considered to be a common element? Was it appropriate that the owners vote on a motion that directly benefited them? 

PJ, Naples

AThe Condominium Act states that no owner can privately use the common area. The Act also says that directors cannot benefit from their elected positions. Having said this let me address your question in a different direction. Why were a husband and wife elected by the membership? We recently had a national, mid-term election, and it’s hard to believe but only about one third of those qualified to vote voted. If your condominium members do not care enough to understand who they are voting for, like the U.S. citizens, and do not vote or vote for the wrong reasons, they have only themselves to blame. In your case, I project that your board of directors will continue to improperly manage your condominium. They will do this until someone sues the board or elects new directors who will act properly. It’s not up to me; it is up to you and your neighbors to call the board on their errors.

QHOA
Reserve

All homeowners in our HOA received a demand notice citing “the community’s covenants re-garding mandatory reserve funding.” This notice gives only an eight-day period to make a $100 payment per household and a 38-day notice of a monthly increase in the “road” fund from $1–$8 (a 700 percent increase). 

A search of all recorded documents shows no trace of anything to support these demands. The word extortion comes to mind. Your thoughts would be most appreciated. 

AB, Orlando

AI would like to answer your question by introducing you to a little history of associations. Homeowner associations and cooperatives have existed for decades. Condominiums were legalized in 1962. But something came along in 1978 in California. Proposition 13 was approved by the state’s voters. That proposition told the government to reduce spending. Shortly thereafter, several other states voted on similar propositions. All the states faced reduction of spending that meant the states would have to look to other ways to create new facilities and repair existing structures. That was the point in time when states required developers to create associations to fund necessary road, utility, and other services within these communities. Locally, some counties passed requirements that developers include in their budgets an adequate road repair reserve section. I am assuming from your question that you live in one of these counties, and more than likely the developer did not have an adequate road repair reserve account. 

I say road, but there could be other necessary public utility repairs. Without knowing the details, I assume that a proper reserve budget as required by the county was not calculated. The board has responsibility to create an adequate budget, and if it appears during the year that the budget was not sufficient to meet the necessary expenses, the board has the right and power to alter or adjust the budget.