A recent ruling by the Second District Court of Appeal of Florida may have a big impact on how community associations go about settling debts with delinquent homeowners. This ruling found that if an association settles a check for less than the amount owed that is also accompanied by communication indicating that that check is meant to satisfy the debt in full, then the association is agreeing to accept the smaller amount as a full settlement of the debt. Obviously, HOAs (especially those in Florida) should take this ruling into account when dealing with collections of past-due assessments and fees.
While this ruling is new, it may be used as legal precedent in the future. This means that HOAs hands may be further tied in the future, preventing them from accepting partial payment from recalcitrant owners without giving up their right to take further action against them.
It also means that associations need to tread very carefully when accepting payments. Not only should they check all correspondence that accompanies partial payments of past due fees, but they should also consult with legal council to make sure that they are not setting themselves up for a future finding that they have accepted a settlement amount that they did not intend to be payment in full.
What HOAs Can Do
The first thing that HOAs should do is, obviously, not accept any payments with the statement that it is meant to be payment in full unless a settlement agreement has actually been reached. This is good practice to begin with, but in light of this recent ruling, it is even more important to reject these kinds of payments, or at least take extra measures that one party insisting the debt is now settled without further agreement does not tie the association’s hands.
Secondly, community associations should also seriously consider using a debt collection agency to handle the recovery of past due fees. While this does cost money, it will generally cost less than other legal action that might have to be taken. Additionally, contracting out to specialists in handling debts means that the settlement procedures will be handled by parties who understand the rules, saving the agency time in legal consultation and reducing the chance of costly mistakes being made.
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HOAs have long complained about how difficult it can be to collect delinquent fees that they are owed by homeowners who rent out their homes. In response, some states have taken action to allow HOAs to demand payment from the tenants of properties that have past due rent or fees, even though they are not technically the ones who have an agreement with the association.
While many HOAs are breathing a sigh of relief that they now have more avenues to recoup their losses and put pressure on delinquent accounts, these laws have also created a situation where the people being held responsible are technically innocent parties that have been put in the middle of a conflict they may have no control over. Despite this, some associations are resorting to booting residents’ cars, even those owned by tenants and not delinquent owners. Is this going too far? Continue reading →
Board members serve an important role in an HOA. It can be a difficult job, and managing an entire community’s business is a lot to handle. In order to help your board be even more effective in the new year, we’ve put together some tips for helping them hold better meetings and make better decisions.
7 Tips for Better Board Meetings
Encourage community participation: for the board to best serve the community, it has to know what the community thinks and wants. Keeping the board an isolated, monolithic entity doesn’t accomplish that. Invite community members to attend the meetings and share their thoughts (while still laying out strict rules for when and how to speak, in order to keep the meeting on track).
Promote ethical behavior: make it a point to have board members always advocate for the most ethical of behavior and actions. Put policies in place for audits and other reviews that get rid of even the appearance of impropriety.
Hold meetings in a neutral location: an HOA board is an official body, but it’s also still a meeting of community members. Holding meetings in a local restaurant, church, or clubhouse makes for a friendlier atmosphere, while still giving the board the space needed to hold an effective meeting.
Recruit board members with the right experience: while the desire to sit on a board is definitely a plus, that alone doesn’t make someone a good candidate. Try to find people in the community with business experience, leadership skills, and other useful traits and encourage them to run for a seat.
Have official documents on hand: all HOA boards have covenants, bylaws, and other official documents that they have to follow. In case any issues regarding them come up, the board members should have these documents available and ready to be reviewed so that the matter can be dealt with quickly.
Serve refreshments: working on an empty stomach can make people cranky and liable to make bad decisions. Have small refreshments available before the meeting (just be sure to put them away when it starts).
Have a clear agenda: the items to be discussed at each meeting should be laid out beforehand, and every member prepared to discuss them fully when they enter the room.
New Year, New Resolve
The most important thing is that board members remember what it is that they’re there to do, and that community members help them do it as well as possible. In addition to these tips, try anything that will foster more communication between board members and HOA residents.
“Due diligence” is a phrase that gets thrown around a lot, and most people at least have a vague understanding of what it means. But many times, an HOA doesn’t actually follow through with all of the steps that make up proper due diligence. Sometimes this is out of ignorance, sometimes it’s just out of convenience, but not following through on taking all the necessary precautions before entering a contract or making a hire can have disastrous consequences.
What is Due Diligence
Due diligence is, of course, the proper investigation of a person or business before entering into a contract or partnership with them. It’s an important part of successful business operations, especially those of an HOA. Because an association’s business is managing a community where people live, making poor decisions thanks to not doing the proper amount of research can have serious effects on people’s homes and lives.
Steps for Due Diligence for HOA
So what steps should an HOA take to make sure that it is performing its proper due diligence? The following steps are some of the basic requirements:
Don’t just hire a contractor based on a recommendation. Even if the recommendation comes from someone you believe to be trustworthy, their word is not enough ensure that a contractor is fit for the job. It is a good starting point, but it’s not the end of the process. Look into consumer reports, check that the contractor has the proper permits, and also make sure that they have experience in the job for which you are hiring them.
If you need to hire a lawyer, find one who specializes in the area of law for the specific issue with which they will be dealing. There are a lot of areas of law, and specializing in the specific areas that a case involves will give the lawyer you hire a much greater chance of getting you a successful outcome.
Get references from other associations or homeowners. The best way to know whether or not a lawyer, contractor, accountant, or other person your HOA is getting ready to partner with is a good match is to talk with the people they’ve worked with before. If their previous clients have nothing but horror stories or found them hard to work with, it’s best to find someone else. Remember, you don’t have to settle for the first person you find.
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A new year is coming, which means it is time for planning out new budgets. Careful budget planning is incredibly important for a community association, as it determines how much money they will have to collect from residents and what projects and services it will be able to complete. Continue reading →
How an HOA should handle security is a very touchy issue. Which security measures should be taken, who is responsible for implementing them, and how those decisions can leave a community association vulnerable are all important matters that need to be taken up. While this post does not have all the answers, it is a starting guide for which security-related questions need to be asked first, and how to approach them. Continue reading →
It’s a sad fact of HOA management that sometimes you will have to deal with the death of a resident. This is obviously a sensitive, highly emotional situation that needs to be handled with sensitivity and finesse, even as certain business needs to be conducted and concluded in a timely manner. How should property managers handle resident death without stirring up controversy and hurt feelings? Continue reading →