Assessment Collection Tools & Tips

The financial health of a common in­terest community association is de­pendent upon the timely payment of assessments by association owners in order to pay the common expenses of the association. Inevitably, many associations face a difficult, yet common challenge – an owner who is de­linquent in the payment of assessments. Both legal and non-legal tools are available to asso­ciations to address and collect unpaid assess­ments that are vital to ensuring the continued success of a community.

Non-Legal Assessment Collection Tools
The board of directors has a fiduciary duty to ensure that the business of the association is well managed—including the finances. To help fulfill that duty, directors—and associ­ation management—must understand, es­tablish, and implement a robust assessment collection program consistently. In order to ensure a well-developed and closely followed plan, the Board should be familiar with as­sociation assessment collection authority and practices, which vary from community to community. It is essential that associa­tions comply with the assessment collection authority established in the recorded gov­erning documents or condominium instru­ments and as authorized by law.

For example, if the governing documents or condominium instruments do not express­ly authorize assessment of administrative charges, such as charges for preparing and sending late notices or for referring delin­quent accounts to association legal counsel for collection, the association may not assess such charges to owners—even if the man­agement agreement addresses assessment of administrative charges to owners. Assessing fees and costs to owners that are not expressly authorized in the recorded governing docu­ments or condominium instruments could subject an association to unnecessary and potentially costly liability.

Based on the document-based assessment collection authority, an association should adopt a formal assessment collection policy establishing clear procedures and policy for collecting delinquent assessments. Adopt­ing an assessment collection policy guides an association in handling delinquent as­sessment accounts promptly, uniformly and consistently. Additionally, if the recorded governing documents or condominium in­struments provide authority, an assessment collection policy can establish the late charge amount for unpaid assessments as well as procedures for acceleration of assessments, among other things.

Another benefit of an assessment collection policy is to put in place procedures for re­minding delinquent owners that payment of assessments is past due. These procedures may include sending a late notice and notify­ing owners that a delinquent account may be turned over to association legal counsel for collection action—which may help prompt payment by delinquent owners without the need for further action.

If late notices sent to a delinquent owner have not resulted in payment, an additional step may be taken before turning over the delinquent account to association counsel for collection action. An often overlooked – but effective – means of collecting unpaid assessments is using an association’s due process procedures to incentivize owners to pay. If the association’s governing documents or condominium instruments authorize the suspension of certain privileges within the association—such as use of recreational facilities or common area or common ele­ment parking spaces—summoning the owner to a hearing to discuss the delinquency and advising the owner of the possible suspension of privileges can sometimes be effective in prompting payment. For ex­ample, associations with community swimming pools may find that holding such hearings prior to Summer, when the demand for swim­ming pool access is highest, can be effective in encouraging owners to pay assessments to avoid suspension of use of the pool.

At any time during the collection process, either pre-judgment or post-judgment, an association may encourage delinquent owners to submit payment plan proposals for Board consideration. The payment plan proposal should outline how the owner intends to satisfy the de­linquency, including specific amounts and a timeline for payments. En­tering into a payment plan agreement may alleviate the need to pursue further remedial action, potentially saving the association both time and money.

If a delinquent assessment account remains unpaid after assessment collection procedures are followed, and non-legal remedies have been exhausted, an association may choose to forward the delinquent ac­count to association counsel to initiate collection action.

Pre-Judgment Collection
Once a delinquent assessment account is referred to association counsel for legal action, the typical first step is for counsel to send a demand letter to the owner advising of the delinquency, requesting payment and describing actions that may be taken in the event of non-payment—such as recording liens against the property and fil­ing lawsuits seeking monetary judgments against the owner person­ally. The demand letter also provides a date by which the owner must pay or dispute the amount of the delinquency before further action is taken. The demand letter serves as a final opportunity for an own­er to pay before a lawsuit is filed or a lien is recorded.

When payment is not received in response to a demand letter, an association may take steps to secure the debt by recording a lien against the property among the land records of the jurisdiction in which the property is located. A lien is a legal notice demonstrating that the lienholder has some legal right to the property until a debt owed by the owner of the property is satisfied.

Two types of liens are available to associations—assessment liens and judgment liens. Assessment liens may be recorded among land records against the property prior to— and typically regardless of—obtaining judgment against the owner. Recording an assessment lien against the property creates a cloud on title to the property, which the owner will need to address in the event of sale or refinance of the property.

The laws governing authority to secure unpaid assessments by lien or judgment vary in each jurisdiction and according to whether the association is a condominium unit owners association or a prop­erty owners (or homeowners) association. Association counsel handling assessment collections should be aware of and familiar with the laws pertaining to association liens and lawsuits in each jurisdiction.

In Virginia, liens recorded by a condominium unit owners associ­ation can secure assessments which are no more than ninety days past due at the time of recordation of the lien. Liens recorded by a Virginia property owners association can secure assessments which are no more than twelve months past due at the time of lien recordation.

Additionally, in Virginia, the statute of limitations for unpaid as­sessments claimed in a lawsuit against a delinquent owner is five years. By contrast, in Maryland and Washington, D.C., the stat­ute of limitations for assessments claimed as unpaid in a lawsuit against a delinquent owner is three years.

Post-Judgment Collection
Collecting moneys due once a judgment is obtained can be more challenging than obtaining the judgment, particularly if the owner—commonly referred to as a judgment debtor after judgment has been obtained—lacks assets sufficient to satisfy the judgment. However, there are steps an association can take through legal counsel to ensure the rights and interests of the as­sociation are protected.

Once a judgment is obtained, one of the first steps an association should consider taking is docketing the judgment among the land records of the jurisdiction in which the property is located. Similar to an assessment lien, docketing the judg­ment creates a judgment lien against the property and creates a cloud on title to the property, as well as other property owned in the jurisdiction where the judgment is docketed.

One of the most popular methods used to collect on a judgment is garnishment of the judgment debtor’s—typically, by a wage garnishment or bank account gar­nishment. The amount of money that may be garnished from a judgment debtor may be limited by the type of garnishment pur­sued. For example, Federal and state laws limit the amount that may be garnished from a judgment debtor’s wages.

In Maryland and Washington, D.C., wage garnishments are not subject to tempo­ral restrictions. A wage garnishment may continue until the judgment is satisfied, thereby avoiding the need for additional garnishment filings. In Virginia, however, a wage garnishment is restricted to collect­ing a maximum of 180 days of garnishable wages. If the judgment remains unsatisfied, another wage garnishment may be filed.

Additionally, if a tenant resides in the property, a rent garnishment may be filed requiring the tenant to pay rent directly to the association instead of to the landlord in order to satisfy the judgment.

If the judgment debtor’s assets are un­known, the association may file interrog­atories against the judgment debtor to obtain asset information that may be used in enforcement of the judgment. A judg­ment debtor is required to answer ques­tions under oath to identify assets. An association may also require the judgment debtor to provide documentation of assets, such as tax returns, bank account state­ments and pay stubs from an employer. The responses provided through interrog­atories or subpoenas for documents may enable the association to locate additional sources to cover the delinquency. Failure to comply with interrogatory or document subpoena requests can potentially lead to the issuance of a show cause summons or even a capias by the court. A capias re­quires the judgment debtor be taken into custody until compliance with the request is provided.

An additional collection tool that can be pursued for egregious delinquencies is foreclosure. All three local jurisdictions—Virginia, Maryland and Washington, D.C.—permit foreclosure to be pursued either judicially or non-judicially. The type of foreclosure an association chooses to pursue should be determined on a case-by-case basis; there are benefits and conse­quences to each option, depending on the circumstances of the delinquency.

Unlike Virginia, both Maryland and Washington, D.C. have “super-priority” lien statutes which provide certain delin­quent assessments owed to the associ­ation priority over the first mortgage or first deed of trust. However, cer­tain statutory restrictions limit what may be recovered by the “super-priority” lien. In Wash­ington, D.C., the “super-prior­ity” lien is limited to the most recent six months of assessments. In Mary­land, the “super-priority” lien is limited to four months of assessments or $1,200, whichever is less, and may not include in­terest, collection costs, late charges, fines, attorneys’ fees or special assessments. Nev­ertheless, enforcement of a “super-priority” lien may be helpful in some circumstances and can sometimes force a lender to pay the amount secured by the “super-priority” lien in order to protect the lender’s interest in the property.

Tools of the Trade
Assessment collection is a complex and nu­anced process—however, it is important to remember that delinquent owners are neigh­bors and friends. The collections process can be stressful for those facing financial difficul­ties, which are personal and sensitive. Al­though an association has a duty to pursue efforts to collect past due assessments, all owners should be treated with compassion and understanding—working with owners is not only kind, it produces results.


By Douglas S. Levy, ESQ.  &  Mary C. Horner, ESQ.

Doug is counsel with MercerTrigiani and currently serves as a member of the Education Committee for the Washington Metropolitan Chapter Community Associations Institute. He previously served on the Quorum Editorial Committee.

Mary is an associate with MercerTrigiani and serves as a member of the Quorum Editorial Committee for the Washington Metropolitan Chapter Commu­nity Associations Institute.




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