To make a collection case successful, it is important the association be able to document the origin of the debt. If an association cannot show where some or all of the debt comes from, the likelihood of recovery becomes very slim.  This article will address the documents that are essential for a successful collections action.
When working a collections file your attorney will want to start at the beginning. This means reviewing the document from which the association’s authority to collect assessments is derived. This document is the association’s declaration, also referred to commonly as “covenants” or “CCRs”.  The declaration is a document that runs with the land meaning that the units within a community are required to comply with the declaration (which is what requires owners to pay assessments) regardless of who owns the unit.  Additionally, owners of units are considered to have legal notice of all requirements contained in the declaration even if they were never provided such a document or read it.
The next essential document for a collection file is the association’s collection policy.  Associations are required by law to have collection policies in place.  The association’s attorney will want the association’s current collection policy (compliant with HB-1276) and any previous collection policies that cover the time frame of the delinquency. The collection policies provide more detail regarding the actions taken by associations when owners fail to pay assessments.  Collection policies will provide details such as the due date of the assessment, what the late fee and interest charges are, and the structure of how delinquency notices are sent, among other things.
In addition to having the above documents, associations must make sure they are following the provisions and requirements set forth in their policies and governing documents.  Failure to follow such requirements could lead to a credibility issue in court, which would weaken the association’s case, and therefore, likelihood of success.
The next key set of documents an association must retain is the delinquency notices sent to the delinquent owners prior to legal action.  This includes all letters sent to delinquent owners informing them of delinquencies and offering six month payment plans, which are essential to a collection case.  The delinquency letters must provide information allowing delinquent owners to understand what is owed and what action may be taken if payment is not received. Associations should also retain any other correspondence sent to delinquent owners, and any correspondence received from delinquent owners.
If the association is attempting to collect a special assessment, or a fine imposed against an owner, all meeting minutes and correspondence documenting the special assessment or fine should also be retained.
The final essential document to be retained is the association’s accounting of the owner’s delinquent balance, often referred to as the “ledger.”  The ledger should reflect the owner’s entire history of credits, debits, fines, etc. from the last zero (or credit) balance.  It is extremely important that the ledger be accurately updated to show the correct balance.
The most important thing to remember when preparing a file to be transferred to an attorney for collections is that the attorney must be able to show the association complied with its governing documents and the debt owed is valid. All of the documents listed above help your attorney to prove the delinquent owner truly owes money to the association.  To be on the safe side remember that any correspondence between the association and an owner should be retained and kept in the owner’s file.
If you have questions regarding documentation pertaining to a collections file, please contact any Altitude Community Law attorney at 303-432-9999.
Jeffrey B. Smith, Esq.
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