Earlier today, the Colorado legislature voted in favor of SB21-002, a bill that impacts Associations’ ability to collect unpaid assessments. That bill is headed to Governor Polis and is expected to be signed into law shortly. So what does this mean for you and your Association’s delinquencies? Luckily, it doesn’t change much.
At the end of June 2020, a similar law went into effect. That June 2020 law put into place some additional requirements for a garnishment. A garnishment is a collection option available to an Association after the Court has entered judgment against the homeowner. So, a garnishment can take place after the Association has sued the homeowner and the Court has made a determination that the homeowner owes a certain amount of money to the Association.
Most notably, the June 2020 law required the following:
- The judgment creditor (read: the Association’s attorney) must send a letter to the homeowner at least 10 but not more than 60 days before they intend to try to garnish the homeowner. If the homeowner has been financially impacted by COVID-19, they can notify the Association’s attorney of that. The Association’s attorney is not permitted to require any type of documentation to support the homeowner’s claims. If the attorney receives this notice from the homeowner, they Association was not allowed to proceed with a garnishment until November 1, 2020, then it was extended to February 1, 2021. However, the balance remains due from the homeowner and continues to accrue penalties like interest on the unpaid balance.
- If the homeowner does not respond to the required letter, and the Association garnishes the homeowner’s bank account, the first $4,000.00 in the bank account is exempt from the garnishment.
- The June 2020 law did not require any additional action from the Association or management company before sending a delinquent homeowner to collections.
What were the practical effects of the June 2020 law?
- We sent out a lot of notices to homeowners, as required by the law.
- Some homeowners didn’t respond at all and we were able to proceed with a wage garnishment as normal.
- Some homeowners responded and said they were financially impacted by COVID-19 and wanted to avoid a garnishment, but agreed to a payment plan.
- A relatively small number of homeowners responded and said they were financially impacted by COVID-19 and were unable or unwilling to agree to a payment plan. This is a minority of the homeowners, but for these homeowners, their cases have effectively been on hold pending the expiration of the June 2020 law.
- Since many people don’t keep more than $4,000.00 in their bank account, bank garnishments have not been an attractive option, as it is likely to result in wasted attorney fees.
- Otherwise, debt recovery continued more or less as normal. Homeowners continue to agree to payment plans and many other collection options remain available, depending on the specific circumstances. For example, homeowners can still be sued and a judgment enter so that we can move ahead with a bank or wage garnishment upon the expiration of the law. Additionally, receiverships and foreclosures are attractive options, in the right circumstances.
The new law passed today basically just extends these requirements and limitations until June 1, 2021. It also requires the Association’s attorney to send another notice to any homeowner that was sent the first garnishment letter but failed to respond. So, the short answer is if you didn’t experience much difference with debt recovery since late June 2020, you are unlikely to notice much difference now. The new law does not put any additional requirements on the Association or management company before sending anyone to collections, nor does it prevent debt recovery in general.
Altitude Community Law monitors legislation that impacts Colorado Associations here. If you have any questions about how this new law might impact your delinquencies or questions about any other pending Colorado legislation, please feel free to contact any of our Altitude attorneys at 303-432-9999 or [email protected].