As a member of a board of a homeowner association y’all find yourselves having to assess penalties to your neighbors for violating the governing documents.


Fines (non-Health, Safety and Welfare)


The collection process only goes as far as the Notice of Claim of Lien which means that y’all can’t foreclose for fines. Given that people are not as aroused by a lien as they once were it means that there is virtually no leverage.  If you have been reading my previous newsletters you know that without leverage there is no collection.  The majority of homeowners know that there is little you can do to them for non-payment of fines as it is as easy going on the Google to find out this information.


Payment of this debt usually comes if and when the homeowner is trying to sell their property as the violations have to be addressed as part of the closing.  This means that both the HOA and the collection agency are waiting a very long time to get paid and even then the homeowner is likely going to seek a reduction in the balance.  The solution is to attempt to get the homeowner to address the situation sooner, not later.  To that end, our agency for example, encourages the homeowner to work it out with the board and to provide incentive to do so, we offer a 50% reduction in our collection fees.  Professional collections is about leverage and creating a sense of urgency.  Resolve it today, not tomorrow.

Fines (Health, Safety and Welfare)


This is a horse of a different feather.  The collection process goes all the way to foreclosure as Health, Safety and Welfare (HSW) violations are treated for all intents and purposes as assessments.  One important point to be aware of is that the lender is not going to pay the super-priority on HSW which means that foreclosure is the only ultimate remedy which brings up two possible problems at sale.


The first is that HSW balances can run quite high and it is unlikely the property will sell for such a high balance.  Properties with HSW are usually as a result of squatters or some sort of illegal activity.  The solution is to reduce the HSW balance to a more attractive sell point.  The second problem is that because no super-priority was paid by the lender, the individual who purchases the property at the auction is likely going to seek clear title which could cause a problem with the lender and no one wants that.  Before a board decides to sign the paperwork to proceed with foreclosure on a property that involves a lender for HSW only they should seek legal advice from their attorney.


Please note that it is rare for a property to only have HSW as usually past due assessments will be a part of the collection file, in which case the super-priority would be paid by the lender for the past due assessments.  If the board decided to move forward with foreclosure to recover the HSW, the super-priority payment would be cried at the sale and the individual purchasing the property would be aware that they cannot get clear title.  The individual knows that they are acquiring the property only to rent out until the lender forecloses.


This represents an ideal situation as the HOA gets paid, the squatters or drug dealers are booted out, the property is fixed up (violations remedied) and an assessment paying homeowner is now involved.