By Deborah Goonan, Independent American Communities
Collection of past due assessments or monetary penalties (fines) imposed by homeowners,’ condominium, or cooperative associations is way out of control.
This is a common complaint I hear from owners of property in association-governed communities all over the U.S.
A single missed or late payment of assessments, or the refusal to promptly pay a disputed fine, quickly balloons from a debt of a few hundred dollars to thousands of dollars.
And the most outrageous part of the HOA collection process is that attorneys keep most of the money collected from the association member. In the example provided in today’s post, you’ll see that Washington state homeowner Jennifer Hart inadvertently missed a single $310 annual HOA assessment, but ended up paying nearly $5,400 in attorney fees and more than $1,000 in HOA late fees and interest.
As KIRO reporter Joanna Small explains, this is all perfectly legal.
That’s because state law does not limit the amount of fees an attorney can charge for collecting a debt on behalf of an association-governed community . In effect, a housing consumer’s debt is a collection attorney’s pay day, and a generous one.
Let me emphasize the fact: in this case the HOA attorney collected more than 17 times the amount of the annual assessment, supposedly for his work in sending letters, placing a lien on the home, and garnishing the wages of Hart and her husband.
If the courts consider such churning of attorney fees “reasonable,” then there’s something grossly wrong with the judicial system in the U.S.
But what about the HOA?
Not incidentally, for its part, the Lakeland Homeowners Association collected a total of $1,120. And $810 of that amount– about two and half times the usual annual assessment — was for late fees and interest.
How does the HOA account for that money? Is it considered additional revenue for the HOA? Does the management company’s contract include additional fees for handling and invoicing delinquent accounts?
Does the penalty fit the homeowner’s “crime” of missing a single $310 payment?
How does this grossly unreasonable collection policy benefit the members of the association?
How could this situation have been avoided?
Perhaps the HOA could have notified Hart of the missed payment more promptly, rather than waiting 10 months, when the attorney filed a notice of lien.
According to an attorney contacted by KIRO, homeowners often don’t understand how to respond to HOA collection and lien notices. Perhaps the HOA’s attorney should have been required, by law, to explain in plain language, the homeowner’s right to obtain an official “answer” by consulting an attorney to represent their own interest.
Perhaps state law should limit the amount of attorney fees that can be charged in relation to the amount of the debt being collected.
And perhaps HOA late fees and interest should also be limited so that they never exceed the amount of the original late payment.
If HOAs, management companies, and collection attorneys knew their potential profits from collecting past due accounts would be capped, based upon the relatively small value of the debt, I have a hunch that 99% of collection abuse would promptly end.
After all, the purpose for collecting HOA assessments is to keep the association financially solvent, and able to pay its expenses. Collection activity should not generate “found” revenue for the HOA, or churn obscene profits for collection agents.
How, exactly, will an out-of-court dispute resolution process work, and how will it help homeowners?
Instead of these common sense solutions to abuse, a Washington State Senator is reportedly looking into a dispute resolution process, to keep collections issues out of court.
Before the reader assumes that keeping collection issues out of court will save money for property owners and shareholders of association-governed communities, consider several important factors.
Who will mediate or arbitrate the dispute regarding how much money is actually owed to the HOA?
Will alternative dispute resolution (ADR) be optional, or an absolute requirement before a housing consumer can file a complaint with a state agency, or take the matter to court?
And will the outcome of ADR be binding, or subject to appeal?
Keep in mind that competent, fair, and equitable dispute resolution would require a truly neutral and disinterested third party to take a close look at the actual debt owed vs. fee churning by the HOA and collection attorneys. It would require some competence in bookkeeping and basic accounting.
Also important, the cost of any out-of-court process would have to be nominal enough for most association members to afford. But this is highly unlikely, especially if an owner/shareholder in the HOA corporation has to hire an attorney to go up against the HOA’s attorney for one or more dispute resolution meetings.
Most importantly, unless state laws set reasonable limits on fees that can be charged, there’s little incentive for an HOA to engage in ADR, in good faith, to negotiate a lower debt repayment plan.
A South Sound homeowner has paid thousands of dollars just to satisfy a bill for a few hundred dollars.
Updated:
A South Sound homeowner has paid thousands of dollars just to satisfy a bill for a few hundred dollars.
That bill was from the homeowners’ association and the cost skyrocketed because the payment was late.
Jennifer Hart pays her homeowners’ association $310 a year to live in Lakeland Hills, near Auburn.
She forgot to pay that amount in January 2017 and, to date, she has now paid out $7,753.59 in late fees and attorney’s fees.…
So, if you’re keeping track, that’s a total of $7,753.59 Hart has been billed, of which $1,120 is late fees plus dues owed to the HOA, and $5,374.76 is attorney’s fees.
“I accept the original garnishment as my error. It’s the additional $4,078 that hurts really bad.
It’s like they’re out to actually devastate families instead of work with them,” Hart said.
I had something similar but with much nicer outcomes. I bought the house and paid the monthly fees. About 3 months later I was contacted by the fee collecting agency who said I had not paid. Got on the horn with them and said I had paid every month. After some discussion, it was discovered that the fee collecting agency made a biggie error on my payment slips. Seems they had the correct # but the wrong street code. So they fixed it and sent me new payment slips.
Oh, by the way, I have announced that I will run for the Board. Doubt that I will be elected but it will show other homeowners that YOU can try to make a difference.