The purpose of an association filing a lawsuit against a homeowner for unpaid assessments is for the court to enter a judgment against the homeowner. Once judgment enters, the association’s collection options switch from trying to get voluntary payments from the homeowner to being able to get involuntary payments from the homeowner through processes like garnishments.
But, when an association files a lawsuit, the homeowner has the right to file an answer with the court. Many homeowners either reach an agreement before the answer filing deadline or choose to not file an answer with the court. But if a homeowner does not agree with the balance or does not agree that they should owe the association money, they can file an Answer with the court and the court requires the parties to start moving toward a trial.
When an answer is filed, the association’s attorney notifies the board and management company (if any) and provides them a copy of the homeowner’s answer. Receiving the copy of the answer is often the Board’s first experience with contested litigation.
Even if a board member or manager has experience with contested litigation in other areas, collections litigation is often different than their prior experiences and can be a source of stress and worry. Additionally, Boards and managers often don’t agree with the homeowner’s version of the situation as conveyed in their answer. This can also raise emotions and stress.
As soon as an answer is filed, most judges issue a mediation order as a matter of course. The mediation order generally requires the association and homeowner to attend mediation within two or three months. At mediation, the association’s representatives (the attorney and the manager and/or board members) speak with the homeowner and also with the mediator to try to reach a mutually agreeable resolution.
Although most judges require the parties to attend mediation and try in good faith to reach a resolution, they are not required to come to an agreement. If an agreement is reached, it is put in writing, signed by both parties, filed with the court, and approved by the court. If the parties reach an agreement, there is no need for litigation to proceed and no trial occurs.
However, if the parties do not reach an agreement, the mediator provides a report to file with the court, confirming that the parties appeared at mediation, but were unable to reach an agreement. The mediation report does not provide any details of what was discussed at mediation and does not include any details of any settlement offers made by either party.
If mediation is not successful, many judges require a pretrial conference or status conference. At this court appearance, the judge confirms that mediation occurred but was not successful, determines how long trial should be scheduled for, and the parties agree to a date and time for trial. Collection trials are usually scheduled for a minimum of two hours and depending on the particular court’s docket, are usually two to three months in the future.
During this time, the parties also provide disclosures to each other. The disclosures provide information about any witnesses they plan to have testify at trial, as well as copies of any documents they plan to present to the court at trial.
On the association’s side, the disclosures include the association’s governing documents, copies of any communications between the board or manager and the homeowner, and the homeowner’s account ledger. The parties are required to provide their disclosures well before trial to avoid surprises during trial.
Before the trial date, the association’s attorney will also prepare the association’s case and confirm with the board or manager who will be the witness(es) for the association. The content of the association’s case generally includes pointing the court to the particular portions of the association’s declaration and collection policy regarding assessments and the collections process.
It also includes providing documentation to the court regarding that particular homeowner’s balance, as well as addressing any specific defenses raised in the homeowner’s answer. At trial, the homeowner also has an opportunity to present their case to the court.
After trial, sometimes a few minutes and sometimes days or weeks, the judge will make findings and rule in favor of either the association or the homeowner. Unlike at mediation where the parties have the option to reach a mutually agreeable resolution, once at trial, the judge decides who wins and judgment is entered. There is always a risk that either party could win or lose, depending on what happens at trial.
For further questions regarding the collections process, feel free to contact an Altitude attorney at 303-432-9999 or [email protected].