How time flies! In April 2021, I published Payment Plan Offer Letters & Top Pitfalls We’re Seeing. While the information contained in that blog is still relevant, when HB22-1137 became effective August 2022, a whole new slew of payment plan offer letter issues emerged. The 2022 law change upended the delinquency notice process and it’s taking a lot of time and effort for associations and management companies to get their collection policies, processes and delinquency notices fully compliant with the new laws. One year after HB22-1137 became effective, here are the top 8 issues we are seeing with new matters being sent to collections:
Problem 1: Collection policy has been updated, but not signed AND sent to the attorney. We are not permitted to proceed with collections until we are able to confirm the collection policy is compliant with Colorado law.
Easy fix: Be sure your board has approved and signed the updated collection policy and that a copy has been sent back to the association’s attorney.
Problem 2: Payment plan offer is not for 18 months or for the correct terms. The statute lists two different payment plan options. One is for foreclosure turnovers (17 payments of $25 each plus current assessments and a balloon payment in month 18) and the other is for collection turnovers (18 equal payments plus current assessments). However, when the payment plan offer letter is sent to the homeowner, many boards have not yet decided if they want to proceed with collections or foreclosure if the homeowner does not respond to the payment plan offer letter. Even if the board has decided, circumstances may change, so they may decide on a different option after the payment plan offer letter has already been sent.
Easy fix: Rather than trying to guess which type of payment plan is appropriate to offer, we recommend offering both options. We also recommend adding a blank line for the homeowner to propose a different plan, understanding that any third payment plan option is subject to board approval.
Problem 3: Notice not sent as required. The association is required to send one of the delinquency notices (we recommend the payment plan offer letter) by three methods. If it is not, a new letter will need to be sent correctly.
Easy fix: Be sure to send the payment plan offer letter by:
-
- Certified mail, return receipt requested to the mailing address AND
- Posted to the unit in the association AND
- one of the following:
- Sent by regular mail to the mailing address; OR
- Sent by email; OR
- Sent by text
Problem 4: Lack of documentation of communication with homeowners. Associations are required to be able to show compliance with HB22-1137. Documentation of communication must be kept.
Easy fix: Be sure to keep documentation of all communications with homeowners, and documentation of all attempts to communicate with homeowners (for example, certified letters returned back as undeliverable), and documentation of compliance (for example, photos of the payment plan offer letter posted to the unit).
Problem 5: Lack of board vote to turnover to collections. The board is required to vote in executive session to send a homeowner to collections. This requirement was previously in place with foreclosure actions and has been expanded to collections as well.
Easy fix: Document the vote with a signed resolution or meeting minutes.
Problem 6: Seemingly irrelevant (but required) information is not being included in the payment plan offer letter. HB22-1137 requires information regarding Small Claims Court and covenant enforcement be included in the payment plan offer letter. This language is required to be included regardless of whether or not the balance is below the Small Claims Court limits. The language is also required to be included regardless of whether or not there are any open covenant violations or any covenant violation fines on the ledger.
Easy fix: Include the required language on the letter, even in situations where the language doesn’t seem to apply.
Problem 7: Interest being charged is greater than 8%. HB22-1137 limited interest to 8% per year, despite what any particular association’s documents say.
Easy fix: Be sure interest was reduced to 8% per annum effective August 9, 2022 and the ledger is not showing interest being charged in excess of that amount.
Problem 8: Payments are not being applied appropriately and/or checks are being inappropriately returned to homeowners because of restrictive endorsements. HB22-1137 requires payments be applied first to unpaid assessments, then to everything else.
Easy fix: Be sure the association’s accounting reflects payments being applied as required. Additionally, checks that state they are for “August 2023 assessments” or “monthly HOA dues” should not be returned to the homeowner for having a restrictive endorsement, as this is what those payments are to be applied to and the check is therefore acceptable.
HB22-1137 is now one year old and the industry is still feeling some growing pains from getting letters and processes compliant. However, if you confirm your letters and processes are compliant now, you can minimize delays or problems later.
You can get more information in our article entitled “What to Know About How HB22-1137 Changed HOA Collections” or by contacting any of our Altitude attorneys at 303-432-9999 or [email protected].