Assessment Collection Presented by Lella Amiss “Ami” E. Pape Christopher DeMers Rees, Broome & Diaz, P.C. 8133 Leesburg Pike Vienna, VA 22182 703-790-6249 (Direct)

Assessment Collection How to increase your success at collection How to limit your inability to recover What are routine collection procedures

Increasing your Success Starts with a working knowledge of your documents Are you a HOA, POA or COA? Collect EVERYTHING due you Start the collection process early, rather than later Be aware of and act on time deadlines

“The Finer Points of Collecting Assessments” When should we demand payment in full? When should we settle? Factors to consider: the “20% rule” alive [and despised] in Fairfax Courts Legal Cost and fees of post-judgment collection are NOT recoverable.

WHEN TO COLLECT Consider debtor’s payment history Consider other personal factors Recent unemployment Recent heath issues

The Demand Process

What is the Attorneys next step? We MUST abide by federal law, FDCPA Prohibits communication with persons other than the debtor We have to allow 30 days to pass after the initial communication Part of our due diligence is to determine the following when an accounts is turned over:

What is the Attorneys next step? Who owns the lot? We can only issue a demand to the lot owner Did they own it during the applicable period Are the assessment correctly assessed Correct day, correct amount? Are late fees permitted?

THE PROBLEM WITH LATE FEES JUDGES ARE VERY PARTICULAR Must Be Specifically Permitted Under Your Declaration/Bylaws (HOA) Or Bylaws (Condo) Must Be Assessed On The Correct Date Must Be In The Correct Amount With Supporting Documents If There Is A Change From What The Documents In Land Records State.

LATE FEES Application must be uniform Double check your management company. Are they haphazardly assessing late fees? If your association is due it, are you leaving it out, and forgoing income to the association?

SETTLEMENT? To Reach A Settlement, Late Fees Should Be The First Thing A Board Is Willing To Waive, Simply Because It Is Taxable Income To The Association.

LIEN STAGE ALWAYS, ALWAYS, ALWAYS SECURE A LIEN Unauthorized Practice Of Law To Have Your Management Company Prepare And Record The Liens Be Aware Of Your Lien Deadlines

LIENS CONDO- 90 DAYS OF ASSESSMENTS UNDER THE VIRGINIA CONDOMINIUM ACT DECLARATION (INCHOATE LIEN) DEPENDS ON YOUR GOVERNING DOCUMENTS HOA/POA- TWELVE MONTH OF ASSESSMENTS LIENS VIRTUALLY ENSURE YOU WILL BE PAID* (THERE IS ALWAYS SOME FINE PRINT) OR AT LEAST INCREASE THE ODDS OF PAYMENT!

Post Lien THE NEXT STEP Obtain the personal judgment by court action

PERSONAL JUDGMENTS LET THE ATTORNEYS DO THIS It Is Expensive It Is A Charge To The Debtor And There’s The 20 % Rule

Advantages: Secures The Debt Personally Can Only Be Avoided In Bankruptcy. When docketed in a county, it attaches to ALL real property owned by the debtor found in that county, not just the unit/lot in your cluster

POST JUDGMENT COLLECTION Variety of means: bank, wage, and tenant garnishments; levies ( think cars and boats) Threat of attachment of assets and/or property could encourage further payment

Disadvantages: Legal fees incurred in post-judgment collection cannot be recovered Difficult beforehand to know whether it will be successful Monies collected can be applied only to outstanding judgment

WHAT ABOUT NON-JUDICIAL FORECLOSURE?

Advantages: Much less expensive than judicial foreclosure Much faster than judicial foreclosure (approximately 6 weeks to 4 months) Encourages debtor to pay the entire debt, or at least agree to a very aggressive payment plan Gives Association means of dealing with the “long-term debtor”

Disadvantages: More expensive than other means of collection ($2,000 - $4,000) If property goes to a lender foreclosure sale, we cannot collect the debt unless there are ‘excess proceeds’

Problems with title Who owned it when What about foreclosure What about bankruptcy What about divorce What about death What about Servicemans Civil Relief Act of 2004

Formally the Soldier’s and Sailor’s Relief Act, now the Servicemans Relief Act of 2004 who: active military and dependants (spouse) Military includes hospital staff, Coast Guard, and many other categories, such as reservist called up for active duty what: grants a stay in civil proceedings if military service has materially affected ability to (1) protect rights and (2) meet financial obligations does not relieve anyone of a just debt

What adjustments should be made in our collection process in light of recent events? Increase in foreclosures Leveling property values Non resident owners Requesting that they contact management if they are active military

CRITICAL – ADDITION TO ALL COLLECTION NOTICES YOU SEND Also add language to late notice/ any notice regarding the debt that once an account is sent to the attorneys for collections, monthly statements do not include all fees and costs due.

Secure The Debt, But Do Not Pursue Too Aggressively [don’t become the latest Metro Section report!]

Be willing in all cases to waive what you can waive to obtain payment: The Board can usually forgive all or part of : Late fees Accrued interest Management turnover fees

Questions?