An association’s ability to collect delinquent assessments is vital to any community. I am often asked what actions could weaken a lawsuit to collect those assessments. A common collection action is as follows: a homeowner purchases property subject to restrictive covenants but fails to comply with such covenants. A lawsuit based on violation of the covenants would seem to present a strong case for any association. However, I have come across three areas that are commonly scrutinized by judges across Colorado. Improper accounting, selective enforcement, and failure to follow written policies are all areas that will draw the ire of a judge in a collection action.
Associations subject to the Colorado Common Interest Ownership Act (“CCIOA”) are required to maintain “accurate and complete accounting records” C.R.S. 38-33.3-209.5 (1) (a). Again, this seems pretty straight forward. However, associations could arguably run afoul of this statute by incorrectly calculating the interest on delinquent accounts. Such error can occur if an association calculates compound interest when only simple interest is allowed in the governing documents.
Associations subject to CCIOA are also required to adopt written policies addressing the collection of unpaid assessments C.R.S. 38-33.3-209.5 (1)(b)(I). Delinquent homeowners occasionally claim they have been singled out. A board can lose its perceived impartiality if it decided to take unique action against a delinquent homeowner without being able to demonstrate unique circumstances requiring such action. What’s worse is that the judge could interpret such action as selective enforcement and negatively affect the outcome of a collection action. For example, if an association’s governing documents permit “accelerating” an account, all assessments for the calendar year become immediately due and payable. This collection tool helps associations offset costs associated with collection and provides an added deterrent for delinquencies. However, accelerating one delinquent homeowner’s account without doing the same to other delinquent homeowners could be perceived as selective enforcement. A judge could then render this valuable collection tool unenforceable.
Delinquent homeowners also frequently claim they were never notified of their delinquent accounts. While this is a common claim, an association is well served by strictly following its collection policy and accurately documenting any correspondence to the delinquent homeowner. Not only should the correspondence be sent pursuant to the collection policy, the contents of the notices should be clear and concise. Presenting a judge with multiple incorrect or poorly drafted delinquency notices will not help your attorney impress upon the judge that collections efforts were “by the book.”
A strict adherence to an association’s well drafted collection policy and accurate documentation of such will help take the air out of most claims by delinquent homeowners. For answers to some frequently asked questions about collections for homeowner associations, please reference our website, contact one or our attorneys at 303-432-9999, or send us an email to [email protected].