Association lien rights are extraordinary.
Condominium and homeowners associations are granted a favorable recovery method afforded to very few creditors. That is, these associations can file a lien against the owner’s property for unpaid assessments, fines, late fees and interest before obtaining a judgment. General contractors and subcontractors are also granted similar rights. Other creditors must first obtain a judgment before recording a lien against property.
However, this extraordinary recourse comes with strict responsibilities. Improper liens can be ordered cancelled from the records, which could cost the association valuable ranking rights. With counsel from Alford & Alford, associations properly prepare their liens and are guided with proper safeguards to protect the enforceability of the liens, taking under advisement legal and practical considerations.
Our association filed a lien; will it protect our position for future delinquencies?
No. Separate liens must be filed as new delinquencies accrue.
A lien preserves the claim described therein for only one year for condo associations and five years for homeowners associations. To preserve the benefits of the lien, a lawsuit and notice of filing lawsuit must be filed before the deadline passes. There are specific requirements for the lien, lawsuit and the notice of filing lawsuit. Contact Alford & Alford to make sure your notice of filing lawsuit complies with the statute.
Laws unique to condo associations:
Minimum amount of lien
I am on a condo board and we have a unit owner that owes just a small amount. Can I file a lien?
Yes, but there is a minimum amount of late fees and fines that can be included in the lien. Contact Alford & Alford, LLP for a full discussion of the amount of liens. There is no universal moment in time in which the delinquent amount justifies filing a lien; there are legal and practical considerations particular to each fact situation.
Perpetual Delinquencies
I am on a condo board and we have unit owners that go months without paying. What can we do about that?
If a unit owner misses payments for three or more consecutive months during an eight month period, then the Board can accelerate the dues for a 12 month period. There are restrictions and requirements that the Board must meet before accelerating dues. With counsel from Alford & Alford, LLP, condo boards and property managers are well informed of the type of assessments that can be accelerated and the process to do so.
Condominium Living. Louisiana law now requires condominium associations to post fidelity bonds or to have insurance in place to cover malfeance actions. So Louisiana condo associations must now abide by both Louisiana law and HUD requirements on this coverage. Contact us for a comparison of the two standards imperative to compliant operation of Louisiana condominiums.
Free Board Orientation. If your condo or homeowners association is not already represented by legal counsel, contact us about a free board orientation (subject to location and time constraints). We will discuss board meetings, laws relative to condo or homeowners associations, and suggestions for collecting dues and assessments and enforcing declarations and building restrictions.
If your community development is experiencing turnover by sales or foreclosures, contact Alford & Alford about tracking these transactions to avoid unnecessary gaps in the collection of dues and assessments.
Alford & Alford counsels associations on the interpretation and amendments to declarations, bylaws, policies and procedures. We also provide guidance on issues relevant to board and general membership meetings.
Practical billing and collection practices for Condo Associations and Homeowners Associations:
Reality is such that most associations will have owners that are either slow pay or won’t pay at all. Here are just a few practical considerations for these situations:
1. In the budgeting process, calculate the bad debt percentage and factor that into the amount of the annual assessment. As distasteful as it may be for paying owners to absorb the payments due by others, to ignore reality could create a cash shortage for the association, which can affect the ability of the association to make repairs, perform routine maintenance and procure insurance.
2. Enter the cost to record the lien on the owner’s statement of account at the time the expense is incurred. That way if a payoff of the account is subsequently requested, the expense will not be forgotten.
3. Similarly, if it is the association’s practice to cancel the lien upon payment (as opposed to shifting this burden to the owner), then the cost to cancel the lien should also be recorded on the owner’s statement at the time the lien is recorded.
4. Make sure that the statement accurately reflects the terminology of the declarations and bylaws. For example:
- If the governing documents do not authorize late fees, then don’t include late fees on the statements.
- If the governing documents allow for interest at the legal rate (which changes every year), then don’t charge the same flat rate year after year.
5. The association should closely monitor foreclosures so that the new owner can be promptly billed. A database of seizing creditors and contact info for each should be maintained to reduce the expense and time of tracing the same creditor over and over. In most instances, it will be the seizing creditor that bids in the property at the foreclosure.
Consult with Alford & Alford, LLP about the following common issues:
- Towing of cars parked in restricted areas;
- Water cutoff in response to unpaid condo assessments;
- Response, if any, to foreclosure actions;
- Rights when the condo unit owner files either a Chapter 7 or Chapter 13 bankruptcy. There could be different responses depending on the type of bankruptcy filed;
- Satellite dishes;
- Reporting non-payment of assessments to credit bureaus; and
- When a condo association is not responsible for interior repairs.
Ready to get started? Schedule a consult now.
