Last week, we posted a blog about the Top 3 Best Collection Remedies You Should Have In Your Governing Documents. Unfortunately, there are often some limitations in many association’s governing documents that should be removed for more effective collections.

Here are our top 3:

  1. Low caps on late fees: The purpose of late fees is to incentivize homeowners to pay their assessments on time. But, if your late fees are way too low, are they really doing their job? For example, if your assessments are $400.00 per month, but your late fees are only $5.00 per month, you may have a lot of homeowners that let their balance accrue for several months or a year, then pay it off with limited consequences. If you have enough homeowners that make irregular payments, your association may have cash flow problems. If homeowners aren’t paying their assessments consistently and on time, the association may not be able to pay its bills consistently and on time.

  2. Requiring letters to be sent via certified mail: Some governing documents require all notices to homeowners to be sent by certified mail. If the governing documents require this and the association fails to do so, they are violating their own documents. More confusing, some governing documents require any communication outside the normal course of business to be sent certified. Are delinquency notices outside the normal course of business? Does it make a difference if it’s a small association that only sends 1 or 2 delinquency notices every few years versus a very large association that sends a hundred or more delinquency notices every month? What about a mid-sized association? Unless the association has adopted a policy clarifying this vague requirement, delinquency notices may or may not need to be sent via certified mail. Sending delinquency notices by certified mail is an unnecessary added expense to the association and we recommend amending your documents to remove any such requirement.

  3. Limitations on who can sign and/or record a lien or release of lien: If your documents require a certain person to sign or record an assessment lien or release of lien, remove this requirement. There is no reason why the Board President or the manager or the attorney has to be the person signing the lien. Having this type of limitation can only cause delays in getting the lien recorded, so delete that limitation and allow whoever the association delegates to be able to sign the lien or release.

Depending on which governing document these problematic limitations are located, the process for amending them out will be different. Some may be easy to remove, while others can be more difficult. Make sure you watch our recent webinar on Amending Your Governing Documents if you want to know more about the process for amending.

If you would like us to look at your governing documents to see what good collection options you might be missing, what bad collection limitations you might be under, and how to change them, please feel free to contact any of our Altitude attorneys at 303-432-9999 or [email protected].

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