Collections for Community Associations… Making A Right Decision.

Things have changed in the last two years, and for the most part the news is good for Condos and HOAs.  Nationally prices have begun to rise, banks are finally coming for their collateral, and community associations are welcoming new good paying owners into their developments and buildings.   On the other hand, associations are still not out of the woods yet because there is still a lot of money on the books that has yet to be collected.  Millions if not Billions of dollars are still owed for delinquent maintenance fees and the question remains; How can that money be recovered in a manner that the cost of the recovery does not exceed the recovery itself?

Who should boards of directors turn to?  Should they continue to rely upon their community association attorneys to try and recover from delinquent owners and defend their associations from the banks when they come to foreclose?  Or should they bring this highly complicated problem to specialists whose only business is to recover delinquent maintenance fees from delinquent owners and first mortgage lenders?

The answer is not as obvious as it may seem as there are qualitative issues involved here that need to be addressed before a decision can be made. The all too easy solution is to run to an attorney for help.  Since the days of Ancient Rome, people in trouble have been directed by the “Attorney Guilds” to bring their problems to them for resolution. Despite Shakespeare’s admonition in Henry VI to “kill all the lawyers” our society has a very dependent relationship with that particular vocation and in any civilized society it is only proper.  In situations where scholarly reviews of the law are necessary there can be no other solution, but for collecting debt for community associations you do not need a “Bar Card.”  There is no question that certain aspects of the collection process do require an attorney.  You must have a bar card to file a lien, respond to a Bank’s Lis Pendens, or foreclose out an association’s lien.  All that requires an attorney and for optimal results one should have an attorney who knows what they are doing and is a specialist in collections.

All too often I have seen community association boards be left completely in the dark regarding their collections that they have placed into the hands of their community association attorneys.  Liens expire, bankruptcies get discharged & cases continue to be ignored, legal bills get out of control, funds from payment plans are accounted for using byzantine accounting methods, paralegals are mostly handling the cases, and when the end game comes (banks foreclosing), the association finds out that they spend two dollars to collect one dollar.  The fact of the matter is that when you are paid on an hourly basis there is no incentive to get more when it comes to collections.

Just as community associations have turned to CAM Companies to oversee their facilities so too should community associations be looking towards collection companies to manage their collections.  To be sure any collection company worth its salt must have access to legal facilities to do the legal work required, but there is so much more to collections that community association attorney’s do not do that make a big difference in effective results.

Some of these differences include such features as outbound calls to debtors, a persistent and resolute letter stream, reporting of non-payment to credit bureaus, payment demands made to first mortgage holders, inbound call centers with professional people trained to work with debtors in distress,  clear and accurate reporting for CAMS and board members, payment plan management that is free and does not create an additional burden on the delinquent owner, and most important a negotiator who will fight tooth and nail with the foreclosing banks when it comes to bank payoffs of what is owed to the associations (no bar card required).  It’s all too easy to send your delinquency issues to your community association attorney, but why not call in a collection specialist to your next board meeting and consider a new solution to a problem that will never go away but can be managed in a more cost effective and efficient manner.  Every board member should ask the question: How much have we collected using our attorney and how much has it cost us?  Run the numbers and consider the alternative.

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