Collecting Assessments

As I have often told the participants in my Condo Operations class at Oakland Community College, collecting assessments is the lifeblood of the Association.

First and foremost, the Association should have a written collection policy in conformity with its condominium documents which would outline when assessments will be deemed to be due, when various late charge notices will be remitted and when the Association’s attorney will be authorized to place a lien on the unit to protect the Association’s secured interest. The collection policy should also set forth when foreclosure proceedings will be commenced, if appropriate, and also state with particularity, whether or not partial payments will be accepted by the Association. The collection policy should also enumerate the fact that unpaid assessments for the remainder of the fiscal year will be accelerated and the penalties which are available to the Association if, in fact, assessments are not paid in a timely fashion.

Most documents provide for self help remedies on the part of the Association in collecting assessments. While permissible, it is not advisable to cut off utilities and deprive co-owners of vital services in the absence of extraordinary circumstances. The Association generally has a plethora of remedies available to collect the assessments due and owning including foreclosure of the Association, statutory lien together with the typical condominium by-law provision which provides for the recoupment of reasonable attorney fees and costs together with interest, late charges and the like.

The Michigan Legislature has created a statutory lien for non-payment of assessments. That lien is perfected by the recording of a document with the Register of Deeds of the county in which the condominium is located putting the world on notice of the imposition of an assessment against the co-owner of the unit against which the assessment has been levied. The lien of the association should be filed by an attorney and not a management company or other third party as it is a legal document and requires legal acumen.

The Association should be aggressive in collecting assessments and should not allow co-owners to become delinquent without prompt action to collect the amounts due and owing.

In the event of a bankruptcy or foreclosure by a first mortgagee, the Association, upon notice, should immediately contact it’s legal counsel who should determine what alternatives the Association has to protect it’s secured interest in the condominium unit. There are number of alternatives which can be utilized successfully by the Association but it should avoid attempting “self help and small claims court” where the tendency is to compromise claims on the part of the court and where no appeal rights are available. In addition, the Association may not be able to recoup attorney fees and costs and does not take advantage of it’s economic clout in pursuing a delinquent co-owner for failing to pay assessments.

Collecting assessments can be a very successful undertaking if the Association is properly prepared and properly represented.