Top 5 Defenses in Collections & How to Beat Them

Nearly half of the delinquent homeowners turned over to the Altitude Community Law Collections Department either pay off their balance or enter into some sort of payment arrangement relatively quickly in the process.  For those homeowners that don’t, it becomes necessary to take the next legal step: filing a county court lawsuit.

The majority of those homeowners that are sued either make a written payment agreement (Stipulation) or simply do not respond (Default).  In the case of default, we ask the court to enter a judgment (the Court’s decision that the homeowner owes money to the association).  About 1 out of 10 homeowners respond and deny the allegations of the lawsuit.  They are required to file an answer with the court.  An answer is the written statement of the homeowner in response to the lawsuit.  The answer must set forth at least one valid defense.  Below are the top 5 defenses that the collection attorneys see raised in response to the typical collection lawsuit.  After each common defense are a few short suggestions on how the association can overcome the defense and prevail in the lawsuit.

1. Financial Hardship (the “Have Mercy on Me” Defense).   This is technically not a defense to the claim that the homeowner owes money to the association.  It is instead an explanation of why money owed was not paid.  It usually takes the form of: “I lost my job”, or “I spent a month in the hospital” and “got behind on my bills”, etc.  Because it is not technically a defense, it cannot stand in the way of the association obtaining a judgment.  The association’s attorney will prepare and file a court document called a motion for judgment on the pleadings.  This motion will state that the homeowner’s hardship statement is not a valid legal defense and therefore, judgment should be entered without the necessity of further legal action.
2. Irrelevant Response.  This type of answer will often state a particular legal right of the homeowner, but one that does not have any bearing on the homeowner’s obligation to pay dues. A homeowner might claim that the association failed to address his neighbor’s unsightly covenant violation of painting his house hot pink.  The defendant refuses to pay dues because of the association’s failure to enforce the declaration.  This statement of homeowner rights is not relevant to the homeowner’s legal obligation to pay assessments set forth in the declarations.  It is therefore not a defense.  As in number 1 above, in this case the association’s attorney would prepare a motion for judgment on the pleadings and obtain a judgment.
3. Payment or Incorrect Accounting.  We often see a very brief statement of defense alleging “the account was paid”, or “I don’t agree with the amount owed.”   This is a substantive defense, meaning it is valid and goes to the truth of the allegations in the association’s lawsuit.  This usually means that the case must go to trial in order to obtain a judgment.  Prior to trial, the association and its attorney must review and verify all accounting records.  The association must be prepared to prove to the court all payments received, and how they were applied.  All charges, including assessments, late fees, interest, fines, and costs must be of the correct amount and must have a legal basis provided for in the association’s governing documents.
4. General Denial.  This type of answer will typically be filed when an attorney represents the delinquent homeowner.  It simply denies each of the association’s allegations in the lawsuit and states that the homeowner owes no money.  Although there are no legal reasons stated for these denials, it is considered a valid answer by the courts.  The attorney representing the delinquent homeowner may very well be buying time and hoping to facilitate a settlement prior to trial.  Often the best way to respond to a general denial answer is to immediately begin settlement negotiations with the opposing attorney.
5. Answer and Counterclaim.  This type of answer consists of at least one legal defense to the associations allegations, AND at least one legal claim by the homeowner against the association.  An example would be that the amount the association is suing for includes covenant violation fines for which the homeowner was given no notice, and no opportunity for a hearing.  Furthermore, the homeowner is claiming selective enforcement and discrimination because he is a Russian national.  The counterclaim states that the association only levied covenant violation fines against those of Russian heritage in the neighborhood even though others were violating the same covenants.  The counterclaim asks for damages in the amount of $10,000.  These types of answers with counterclaims should be taken very seriously by the association.  If not responded to properly and in a timely fashion, a money judgment could be entered against the association.  Your attorney should review these counterclaims immediately and advise the association whether to notify their insurance carrier.