Unlocking Success: Using Legal Representation Over Collection Agencies for Delinquent Condominium Assessments
Community associations in Michigan play a crucial role in maintaining the integrity and functionality of shared living spaces. However, when faced with delinquent condominium assessments, these associations often encounter significant challenges in recovering the owed amounts. While some may consider turning to collection agencies as a solution, there are compelling reasons why community associations should select a law firm instead. Debt collection agencies primarily work to recover debts, often handling a large volume of accounts. While they employ methods like phoning debtors and sending late payment notices, their approach is limited and may not be suitable for complex legal matters. Additionally, the process may seem automated and simply checking the boxes rather than identifying solutions for effectively collecting delinquent assessments. On the other hand, legal representation can offer a range of remedies to pursue delinquent assessment, such as sending demand letters, initiating lawsuits, obtaining money judgments, and enforcing these judgments through various legal means. Additionally, legal counsel can negotiate settlement agreements tailored to the specific circumstances of the debt.
The main difference between legal counsel and a collection agency is that legal counsel can take legal action against debtors. Collection attorneys are licensed professionals who can represent associations in court and file legal claims against delinquent co-owners. Collection agencies, on the other hand, are not licensed to practice law and cannot take legal action.
Responsibility for Assessments/Dues
The Michigan Condominium Act and association governing documents establish the obligation for co-owners to pay assessments/dues. To ensure compliance, associations must have clear payment procedures and collection protocols in place, which a law firm can help establish in line with legal and contractual requirements. Waiting until delinquency becomes a problem risks financial instability and compromises essential services for co-owners. Thus, timely action, guided by a comprehensive collection policy, is essential.
Implementation of a Reasonable Collection Policy
The board of directors bears the responsibility of enforcing collection actions, necessitating the implementation of a reasonable collection policy. This policy should establish firm due dates, late fees, and steps for addressing delinquencies uniformly. Compliance with state and federal laws, such as the Fair Debt Collection Practices Act and bankruptcy provisions, is paramount to avoid legal pitfalls.
Involvement of Legal Counsel
Upon the failure of non-litigation options, involving legal counsel becomes imperative. Attorneys specializing in community association law possess the expertise to assess delinquent accounts thoroughly and recommend the most effective course of action. Collaboration between the board, property manager, and legal counsel ensures informed decision-making and adherence to due process procedures.
Collection Litigation
Legal counsel facilitates the pursuit of delinquent assessments through litigation, utilizing strategies tailored to the association’s circumstances. Whether pursuing personal obligations or leveraging assessment liens, legal expertise is instrumental in maximizing recovery while navigating complexities such as foreclosure procedures and equity considerations.
Obtaining Attorney Fees and Costs
Michigan law enables associations to recoup reasonable attorney fees and costs incurred in pursuing delinquent co-owners so long as the governing documents provide for this remedy. See MCL 559.206. Adherence to fee standards established by legal counsel enhances the association’s likelihood of successful cost recovery.
While the process for collecting delinquent condo dues is ultimately governed by restrictive covenants and the association’s collection policy, the typical process for collections is as follows.
- The co-owner becomes delinquent by failing to pay their dues in a timely manner.
- The association sends a reminder letter advising the co-owner that the payment is delinquent. Then, it will be turned over to the attorney for further action if the owner fails to pay their outstanding condo dues.
- If the co-owner still fails to pay their delinquent dues, the association provides a ledger to the attorney that identifies the delinquent dues, going back to a zero balance along with interest and late fees.
- The attorney sends an initial demand letter to the co-owner requesting payment of the delinquent dues. In many cases, the co-owner will enter into a payment plan with the association to pay the delinquent condo dues.
- The attorney records a lien for delinquent association dues until the delinquent dues are paid in full to ensure that the association’s lien will not lose priority over other liens.
- The attorney performs research as to whether the lien will prioritize other prior recorded interests against the property and provides a recommendation to the association as to the available options to collect the delinquent condo dues.
- The association proceeds with foreclosure by advertisement of the association lien or filing a lawsuit seeking judicial foreclosure and a money judgment.
- The association receives title to the unit if it submitted a credit bid at the unit foreclosure sale or receives proceeds from the foreclosure sale to apply to the delinquency. Alternatively, the association obtains a money judgment and collects on the money judgment until the delinquency is paid in full.
While the above process for condo association collections is common, keep in mind that every condo collection case is different, and Hirzel Law creates a plan for each matter based on the facts and circumstances of that case. Our collection process is clear and transparent so that everyone involved is informed throughout the process.
Conclusion
The decision to use a law firm instead of a collection agency to collect delinquent condominium assessments is a strategic one, with significant implications for the financial health and stability of community associations. Debt collection agencies have faced scrutiny for engaging in improper and illegal debt collection methods. In contrast, attorneys are held to a high ethical standard governed by rules of professional conduct, ensuring fair and lawful practices in debt collection. By leveraging legal expertise, associations can navigate the complexities of the collection process with precision and success. Legal counsel offers tailored solutions, ensures compliance with relevant laws and regulations, and maximizes recovery while upholding ethical and legal obligations to co-owners. Collecting delinquent condo association dues is not fun for condo associations, but it is necessary to provide the required services. At Hirzel Law, PLC, our attorneys can help your association resolve its delinquency issues.
Rita Khan is the Director of Marketing at Hirzel Law, PLC. Ms. Khan received her Bachelor of Arts in American Culture from the University of Michigan, Master of Business Administration with a focus on Business Intelligence from Baker College, Paralegal Certificate from the University of Michigan Flint – Center for Legal Studies, and Graphic Design Certification from the New York Institute of Art and Design. Ms. Khan has over 15 years of experience in the property management industry from residential real estate, student housing, and condominium & HOA management. Ms. Khan holds several designations and certifications such as Certified Manager of Community Associations (CMCA), Association Management Specialist (AMS) and Professional Community Association Manager (PCAM) from the Community Associations Institute (CAI), Accredited Residential Manager (ARM), Accredited Commercial Manager (ACoM), and Certified Property Manager (CPM) from the Institute of Real Estate Management (IREM), Certified Apartment Manager (CAM), Certified Apartment Portfolio Supervisor (CAPS), and Certified Apartment Supplier (CAS) from the National Apartment Association (NAA), Project Management Professional (PMP) from the Project Management Institute, Certified ScrumMaster (CSM) from Scrum Alliance, Professional Certified Marketer Marketing Management (PCM) from the American Marketing Association and Certified Digital Marketing Professional (CDMP) from the Digital Marketing Institute. She is a licensed Michigan Real Estate Salesperson, Broker and Notary Public. Ms. Khan is also a Real Estate Property Management faculty member at Schoolcraft College where she teaches Introduction to Property Management and Residential and Commercial Property Management. Ms. Khan currently serves as the Chair of the CAI-Michigan Social Media Committee and is an active member of the Institute of Real Estate Management (IREM), where she serves as a member of the IREM Foundation Board of Directors and a member of the Board of Directors for the IREM Michigan Chapter. Ms. Khan has previously served as a Delegate Member on the CAI Michigan Legislative Action Committee. She may be reached at (248) 478-1800 or rkhan@hirzellaw.com.
