By: Ronald J. Barba
The scenario is all too frequent when a board elects one of its members to meet contractors ahead of a major project. Invariably, the board member with the most time on their hands is chosen to contact the contractors and to meet them on site to discuss the details of the job. Before you go any further in the scenario there are some issues you may want to consider before the meeting. Failing to properly plan on a project from its inception to completion is an invitation to trouble. Many mistakes made early in the process can lead to expensive fixes and even litigation.
The first issue to consider is the level of authority the Board member has in his or her meeting with the contractor. If you’re dealing with a contractor who doesn’t perform much work for condominium associations, they may not be aware of the board structure and the formality that goes into entering into contracts. Appreciate that although the board has chosen from among its own to meet with the contractor, that board member thereafter becomes an “agent” of the Association. This article is focused on the importance of the agent and his or her authority.
The degrees to which an agent may bind the association vary greatly, so defining the parameters of the board member/agent’s authority at the outset is prudent. It is equally important that the board member agent make it expressly clear to the contractor that he or she is not authorized to contract unilaterally. The message should be clear that there is a board of directors which will review all the proposals and then collectively decide which company to hire. All of this may seem overly cautious, but the state of the law on actual versus apparent authority should keep you vigilant against assumptions of unwary contractors. So, what is all this stuff about agency?
Agency is the fiduciary relationship resulting from the consent by one person to another that the other shall act on his behalf and subject to his control and that the agent will act accordingly. An agency relationship exists when the principal (Association) asks the agent to act for it and the agent agrees. The agent knows that the Association is always in control the project. You may be aware that a real estate agent is someone with whom you enter into a contract to sell your home. The Agent makes representations (hopefully) in your best interests to potential buyers and may under certain circumstances, bind you to those representations.
When the agency relationship is not so clear, the contractor may believe that the person is an agent with the authority to bind the Association. That is call “apparent authority” and is something for a corporate board and its members to be very watchful for.
“Apparent authority” is reliance by the contractor that the Association’s agent is authorized to make deals. Often the question of apparent authority boils down to the reasonableness of the contractor’s reliance. Reasonableness can be judged based in part by the form of the agent’s representation, the relations of the parties, and each parties level of knowledge and access to information. The contractor must exercise some judgment, must have acted in good faith and consistent with business practices. The reasonableness of the belief in the apparent authority of a board member is determined by the facts and circumstances of each case.
So next time the board discusses meeting with potential contractors you it may want to establish a plan ahead of time by providing the contractor a writing which acknowledges that the board representative is not authorized to bind the Association unilaterally and that the board of directors makes all decisions about contract terms. You may find that an ounce prevention will save many thousands of dollars in unnecessary litigation over confusion and accidental representations.
By: Kristie Leff
With the cold temperatures now upon us, it is important that associations make sure that non-occupied units are property winterized so that water pipes do not freeze. The reason this is important is because a pipe freeze can cause water damage to not just the non-occupied unit, but to adjacent units and the common elements as well. The association’s insurance policy provides primary coverage, but many insurers will not cover damage claims due to frozen pipes if the unit was not properly winterized. This means the costs to repair the damage will be borne by the association. Sometimes these costs can be assessed to the non-winterized unit, but it is best to be proactive to try to avoid the situation altogether.
First, the association must get access to the unit. The authority for getting access to units is usually found in the declaration. Most access provisions allow the association access to all portions of the property, including units, in cases of emergency or upon giving reasonable notice to the unit owner for a mutually agreeable time. It is always best to try get unit owner permission to enter. This will prevent accusations of trespassing or theft of contents. However, if the unit is not occupied, or is abandoned due to an impending foreclosure, there may not be a unit owner around to notify or from whom to get permission to enter. In these situations, the only way to gain access would be if the situation is deemed and “emergency.” In certain situations where attempts to contact the unit owner are or will be fruitless, given the potential exposure on the part of the association, the threat of freezing pipes during the winter qualifies as an emergency, thereby allowing the association to gain immediate access to the unit for the purpose of winterizing it.
Once access is allowed or the emergency provisions are triggered, the association should hire a locksmith to access the unit, and a plumber to winterize the unit, either by draining the pipes and turning off the water, or by setting the temperature such that freezing does not occur. This may mean having to get utilities turned on. The expenses incurred by the association can generally be assessed to the unit after notice and hearing to the unit owner. However, in cases where the unit owner has gone to parts unknown or has abandoned the unit due to an impending foreclosure, there may be no one to whom to send notice. In that case, depending on the circumstances, we recommend that the hearing notice be sent to the last known address, or that the expenses nonetheless be assessed to the unit. If anyone later contests the charges, a hearing can always be held at that time to address the challenge.
Please contact our office should you have any questions about whether access to the unit is warranted as an emergency, and how the expenses associated with damage from frozen pipes and/or winterizing the unit can be assessed back to the unit.
By: Barbara G. Hager
When it comes to satellite dishes and condominium associations, “going with your gut” may get you into legal trouble!
If you have lived in your common interest community since the early 1980’s you probably remember the time when the Association could forbid satellite antennas and dishes being put up by unit owners. However, the federal government created a new law in 1996 which protects rights of unit owners in condominiums to have a satellite dish or antenna. That new law was called the “Over-the-Air Reception Devices” (“OTARD”) and was adopted as part of the Telecommunications Act of 1996.
After this law was enacted and continuing to the present, Associations may not forbid unit owners from putting up a satellite dish, as long as the dish is no bigger than a meter (39.37”) in diameter. The Association can enforce their other rules regarding no objects being placed on the roof, front of unit or on the outside walls of the unit. Under the law, the Association cannot prohibit the unit owner from placing the dish or antenna on their limited common area decks and balconies. The dish can also be put on the railings of those decks and balconies.
The OTARD law forbids restrictions that might impair the installation, maintenance or use of the types of antennas (dish, TV antennas and wireless cable antennas). The rule does not prohibit legitimate safety concerns. Additionally, historic districts and buildings on the National Historic Register are exempt from the rule, and can forbid satellite antennas and dishes altogether.
Importantly, under OTARD the Association may not require the unit owner to get prior written permission before putting up the dish. That would be considered placing an unreasonable restriction or delay to obtaining televised services. Of course, any Board member or property manager would say: “we have to be able to control where they place the dish!” This is where your rules would come in. The Association’s rules should have a section advising the unit owners where it is permitted to place the dish. Those rules would include things such as, any attachment device must not damage the limited common element when it is removed.
Additionally, the Association is prohibited from requiring that the dish be put in a place where reception would be impossible or substantially degraded. OTARD therefore prohibits the Association from requiring the dish to be placed inside the unit or in a garage.
I have seen several sets of Association rules which still require prior written permission to install satellite dishes or TV antennas. This is against the federal OTARD law and may invite lawsuits. If you would like assistance in drafting proper satellite dish rules, call us!
By: Barbara G. Hager
We at Bender, Anderson and Barba P.C. hope you all have a Happy Thanksgiving. I am thinking today especially about all the board members of our client associations, who work very hard! Thank you for all you do in service to your associations! We know it is a lot more than just going to a meeting once a month, and it is certainly not just pushing papers.
There is a lot expected of board members in performing their duties. Directors and officers have serious legal duties: the duty of care, and the duty of loyalty.
The duty of care means, in all that the Board does, it must work in the best interests of the association, and, just as it says, make decisions carefully. No rushed decisions and no decisions “pushed through” by one particular Board member. All directors should discuss the decision, review all the related documents, contracts, spread sheets etc. It should be noted specifically in the minutes that there was discussion and review of related documents prior to the decision. With complex matters, such as major construction projects and loans, professionals should be consulted, and their reports reviewed closely.
Board members also have a duty of loyalty. That means that a director’s decision is always based on what is good for the association as a whole, not on what is good for a particular unit owner the director is friends with, or for a particular director’s personal financial interests. It also means no board member may contract with or do work for the association unless it is in the best interests of the association, and that Board member recuses him or herself from the vote. The board should be particularly resistant to granting contracts to board members or companies with which board members are associated. There are complex legal requirements regarding conflicts of interest in the event that a board member is hired to do work; contact us before moving forward.
The board of directors makes decisions and “speaks” with one voice. No board members should be out in the community talking with unit owners about decisions the Board has or is going to make. Only the board as a whole communicates those decisions. Additionally, board members should be particularly careful not to promise a unit owner that some repair matter “is the association’s responsibility.” The matter of responsibility must be checked with the Declaration, Maintenance Standards and Maintenance Matrix (if you have one). Not every problem the unit owners have is the association’s responsibility! Do not let yourself feel pressured to agree to something simply because a unit owner pushes you or screams at you about it. Also, do not let pressure from unit owners cause your board meetings to become contentious; always listen and respect one another as the Board reviews and decides each matter.
Keeping these principles in mind, you will all do well, as careful and loyal board members, which in turn will help your communities flourish.
Again, we thank you and wish you well in your service to your common interest community.
By: Kristie Leff
As social acceptance of smoking cigarette smoking changes, smoking in condos is becoming a hot-button issue. Smoking is not a constitutionally protected right, and more people are becoming aware of the health effects of second-hand smoke. As a result, we have seen an increase in complaints from units owners about smoking, and more associations that want to explore smoking bans. That being said, in most cases associations do not have to take any action as this situation can be considered a matter to be addressed between the unit owners themselves: the non-smokers always have a legal right to seek redress against the smoker by bringing a direct action against him in civil court for nuisance. However, if there is a desire among the community to ban smoking in units, or if the smoking complaints may lead to lawsuits being filed, there are measures the association can take address the situation.
For example, most associations have nuisance rules that give the board the authority regulate noxious or offensive activity which may become a nuisance to other unit owners. Such rule provisions can be used to address smoking if it is causing a nuisance for other unit owners. The board can send notice to the smoker that a hearing will be held to address the allegation of nuisance behavior. Based on the evidence presented at the hearing the board can then make a determination as to whether or not the smoking is a nuisance (is there just occasional smoking, or does the smoking happen continually; is the smoke actually emanating into other units; can better ventilation or caulking of cracks remedy the situation; do the complainants have health issues that make them vulnerable to even small amounts of smoke, etc.). If the board determines the smoking is a nuisance and the emanation of the smoke cannot be remedied, the board has the authority to impose fines on the smoker for violation of the nuisance rule.
Another option the board has is to adopt a no-smoking rule pursuant to Connecticut General Statutes Section 47-261b(f)(1). The board always has the power to adopt rules regulating smoking on the common elements. However, this statute allows the board to enact rules to regulate the behavior inside units which adversely affects the use and enjoyment of other units or the common elements by other unit owners. Such a rule can be adopted by the board after notice and comment to unit owners. As with all rules, the unit owners would not get to vote on the rule. Even though an association may already have a rule prohibiting nuisances, a new rule banning smoking in units would directly address the smoking issue and the board would be able to issue fines (after notice and hearing) without having to make a determination as to “nuisance”. Instead, the board need only make a finding that the smoking is adversely affecting others. As this is an emerging area of law, this approach has not been widely utilized, or been challenged in court, so we do not know if this approach will actually stand the test of time.
Instead of adopting a rule, a declaration amendment can be adopted to ban smoking inside units. Regulation of behavior inside of units is considered a “use restriction.” Most declarations allow for implementation of the Connecticut General Statutes Section 47-236(f) procedure to impose a use restriction (such as a smoking ban) upon an affirmative vote of 80% of the unit owner with no objections. The advantage of a declaration amendment as opposed to a rule banning smoking is that a declaration amendment is less susceptible to a legal challenge because it is voted on by the unit owners, not just adopted by the board. The challenging part about a declaration amendment is getting the affirmative 80% of unit owners to vote in favor of it. In order to encourage enough unit owners to vote in favor of a smoking ban, it may be wise to allow a grace period in order to give smokers time to either quit smoking or move out.
Before adopting either a rule or declaration amendment banning smoking, we recommend that the board survey the unit owners to gauge their interest is taking such action. If few unit owners are interested this may not be a worthwhile approach-- it may then be best to approach smoking complaints on a case-by-case basis using the existing nuisance provisions of the rules.
Please contact our office should your association want assistance with smoking complaints, or with implementing no-smoking rules or declaration amendments.
By: Kristie Leff
One of the most important functions of condominium boards is the assessment and collection of common charges. Without a properly funded budget the association will not be able to pay its expense, maintain the property, pay insurance premiums, or fund its reserves. It is essential that the proper budget adoption procedures are followed because the lack of a properly adopted budget could mean that common charges are not collectible. The budget adoption procedures are found in Connecticut General Statutes Section 47-261e(a). Always check the association’s governing documents as well as there may be additional budget adoption procedures that must be followed. The statutory requirements are summarized as follows:
Why is it important to follow these procedures? A Connecticut Superior Court case demonstrates the importance of a properly adopted budget. In the case of Westbury Condominium Association v. Tashjian, 2006 Conn. Super.,LEXIS 3295, November 6, 2006, J.D. of Hartford, the association brought a foreclosure action against a unit owner who refused to pay increased common charges. The association’s budget increased the common charges from $244 to $372 per month. The unit owner continued to pay the $244, but refused to pay the increase. Once the account became delinquent the association brought a foreclosure action. The unit owner filed a special defense alleging that the increase was invalid because the budget had not been properly adopted insofar as the budget summary not provided to unit owners until the day of meeting, and the summary misrepresented the amount of the increase by stating it was a 28% increase when in fact is was a 50% increase.
In court the association argued that validly levied common charges are an absolute obligation and are not subject to special defenses. The court agreed with this, but noted that that the key phrase is “validly levied.” The court found the common charges were not “validly levied” because the budget was not adopted properly—the summary was not provided until the meeting, and the summary misrepresented the amount of the increase—stated it was a 28% increase when in fact is was a 50% increase. The court stated that the purpose of sending notice and a summary of the budget in advance is to put all unit owners on notice of the proposed budget, give them ample opportunity to study the proposed budget, and decide whether or not they will appear at them meeting. The court therefore entered judgment in favor of the unit owner and the association was unable to collect the common charge increase from the unit owner.
This case is a cautionary tale to associations: if budgets are not properly adopted common charges are uncollectible. Avoid this trap and be sure to follow all statutory procedures and any other requirements in the association’s governing documents when adopting budgets.
By: Andrea Dunn
Every Association has dealt with the complaints. One (or more) unit owner who refuses to clean up after their dog. It seems like such an easy thing for a unit owner to do, but for whatever reason, certain unit owners don’t find it necessary to bag the waste and dispose of it properly. This can lead to an infestation of parasites, deer ticks and, sometimes, rats. The property manager has sent letters to no avail or receives a response such as “It’s not my dog’s waste, I always pick it up. Your information is wrong”. What is an Association to do at this point? The rules state that pets are to be on leash and that waste is to be picked up immediately and disposed of properly.
The first thing to consider is what evidence exists to back up the claim. Did another unit owner take a photo of the incident? Is the complaining unit owner willing to come forward and present evidence? Typically, if the warning notice from the property manager does not fix the problem, the Association will have a hearing with the unit owner. This must be done within the statutory framework of the Common Interest Ownership Act, §47-244(a)(11): notice sent to the unit owner with at least ten (10) business days notice prior to the hearing date notifying the unit owner of the rule violation, their right to be heard and attend the hearing and have witnesses and that the Board will issue a decision after the hearing. Remember, that even if the unit owner fails to attend the hearing, the Board can issue a decision. These steps are important and, if not done properly, could result in a court action being dismissed should the matter make its way to a foreclosure action for the non payment of fines issued for the violations.
If the Board votes to fine the offending unit owner daily until the unit owner decides to comply with the rules, this could result in fines ranging into the thousands depending on what an Association’s bylaws allow for fines in a short period of time. So, for example, a Board issues daily fines of $50.00 per day until the unit owner complies. This could result in $1,500.00 in a 30 day month. If the offending unit owner does not pay the fines, within 30 days, a foreclosure action may be started for the fine amount. This should be an easy argument to make to the court, right?
MAYBE. Let’s say the unit owner finally wakes up upon receiving the court summons and decides to fight. His argument? It’s not my dog’s waste. I need to see proof for everyday that a fine was issued that my dog defecated and I didn’t pick it up. There are numerous dogs at the condominium and it could be any of their waste. If you are fining me daily, there should be proof for everyday my account was issued a fine. NOW WHAT? Do you have photos of his dog defecating for 30 days straight? Does your property manager visit the property daily just as the offending unit owner’s dog is doing his business and can testify? Should the unit owner make these types of claims, the association will have to answer to justify the fines. Remember that fines are not to be extra sources of income for the association. Fines are to encourage compliance, not make money.
So what can an Association do to make a better case? If your Association has cameras, pinpoint the times when the dog does his business and keep track or do a sampling of days and keep a file of the offenses for the hearing and court case. Encourage unit owners to speak up and take note of the dates and unit number that witnessed the act. If the property manager makes weekly visits, have him/her check and note the date/time. This may result in fewer days to fine, but your proof will be solid for lack of a better word. If the problem is big enough, ask for volunteers to take shifts in the morning or evening when most dogs are doing their business.
Another option is DNA testing. Yes, this really is a thing. Some communities have policies that require dog owners to submit to DNA testing so that this profile can be kept on file. This way, if there is a problem, the waste can be tested and the offending unit owner is fined. This can be costly and somewhat cumbersome. The property manager would have to be present when the dog is giving the sample so that no shenanigans can occur with unit owners simply using a friend’s dog for the test to prevent their dog from being caught.
My point is not to discourage Association’s from enforcing the rules. These rules need to be enforced as pet waste left on the common areas can lead to infestations. My point is to protect the Association with proof. The proof will save you and when confronted with proof, a unit owner is more likely to comply with the rules. So, get the proof and watch where you step.
Evicting Tenants Under CIOA and Landlord/Tenant Statutes: Statutory Requirements and Procedures Must be Followed to Avoid Dismissal
By: Barbara G. Hager and Kristie Leff
Under the Common Interest Ownership Act associations have the right to evict problematic tenants who violate the Declaration, Bylaws, Rules or Regulations of the association. Associations can evict tenants even though the association is not the landlord/unit owner, and permission of the landlord/unit owner is not needed. However, in order to take advantage of this procedure, the statutory requirements and prerequisites must be properly implemented. Otherwise, the eviction action may be subject to dismissal.
First, before proceeding with an eviction, sections 47-244(d) and (e) of the statute require that notice of the violations be sent to both the unit owner and the tenant, and that a hearing be held to give the unit owner and tenant an opportunity to be heard. Also, the tenant must be given at least 10 days after receiving notice of the violation to cure the violation.
Additionally, section 47-278 of the statute requires that before instituting a proceeding against a unit owner, the association must send a ten business days’ notice letter via both regular and certified mail noticing a hearing for the purpose of giving the unit owner the opportunity to be heard. While an eviction action against a tenant is not technically the institution of a proceeding against a unit owner, our advice is it is a best practice to have all notices comply with section 47-278 in order to avoid problems. This means that the hearing notices should be sent with 10 business days’ notice by both regular and certified mail.
If the violation is not cured and the association needs to proceed with an eviction action, the action will be filed in Housing Court. Housing Court judges are particularly interested in the tenant receiving proper notice of the specific violations, being given the statutory minimum of 10 days to cure the violation, and clearly being informed the lease is terminated and they will be evicted. Therefore, although the CIOA statute is vague on this point, it is a best practice to be sure notice sent to the tenant complies with the requirements of pre-termination notices (a/k/a Kapa notices), in that, in addition to notifying the tenant of the hearing, it notifies the tenant of the specific violations, provides a minimal 10 day cure period, and clearly informs them that their lease is terminated and they are being evicted.
If the statutory procedures are not followed by the association, and if the notices fail to comply with sections 47-244(d) and (e), and section 47-278, the eviction action may be subject to dismissal. Housing Court judges are very strict in applying statutes, and will scrutinize every aspect of the eviction case to ensure the tenant’s rights are protected. If the case gets dismissed, the association will have to start over, costing time, money, and aggravation. In order to avoid dismissal, be sure to follow all statutory procedures and requirements, and implement the best practices as described.
By: Ronald J. Barba
Now comes the lawsuit.
After all the warning notices from the association and demand letters from counsel, the collection turns into a foreclosure matter. The sixty-day notice requirement having elapsed, a complaint is drafted and served upon the unit owner(s), mortgagees and other lienors. The rules of practice set forth the timing of pleadings, defenses, discovery, and judgment. Competent counsel will make every effort to minimize the time it takes to obtain a judgment so as to protect the association’s nine-month priority lien. Unresponsive owners will be defaulted and mortgagees will file pleading to protect their respective interests.
Just prior to moving for judgment, an appraisal of the unit is ordered and sent to the court. Counsel communicates with the association’s property manager to obtain up to date account information and the execution of an affidavit in support of the association’s claim for monies. For self-managed associations, it is critical to establish early in the process which board member(s) will be responsible for providing account information. Any confusion or delay could adversely affect the association’s interest.
The type of judgment to be obtained by the association is dependent largely upon the amount of equity that exists in the unit. In this context, equity is the value of the property minus the total amount of liens against it. If a unit is worth $100,000.00 and there is a $50,000.00 mortgage lien on the title, the equity in that unit is $50,000.00. A unit having little of no equity will likely be subject to a “strict foreclosure”. One with equity of any significance will be subject to a judgment of foreclosure by sale. In a strict foreclosure the court assigns “law dates” by which defendants must redeem their interests (meaning pay the debt). If no defendant redeems, the association becomes the titled owner of the unit and may dispose of it as it deems appropriate. A foreclosure by sale is somewhat more involved in that it involves the appointment of a court-appointed “committee” to facilitate the public auction of the property.
But what about the banks?
Conspicuously missing from the description of events in the collection process is mention of how banks behave when one of its borrowers’ defaults on their common charge obligation. Standard loan documents (Note and mortgage deed) usually attach a separate document called a “Condominium Rider”. Contained with condominium riders are provisions which empower the lender to take steps it deems necessary to protect its interest in the unit should the borrower default in the payments to the association. One commonly used method of protection is when the lender, having been duly advised of the debt, elects to pay the arrearage on behalf of the unit owner.
Banks will attach the amount paid to satisfy the debt to the mortgage debt. It is not uncommon for banks to take this step multiples times where recidivist defaulting owners are involved. Banks may elect to pay early or at any point in the collection process. Any bank wishing to pay on behalf of its borrower must pay all that is owed in order to settle the case or satisfy the judgment. In some instances, lenders will opt to redeem their interests on their law date. In such a case, the lender’s liability is limited to the priority debt plus attorney’s fees and costs. Any common charges or other charges not included in the priority debt are then rendered uncollectible by the association.
So too would the association be limited in its recovery in a foreclosure by sale. After a successful sale, the proceeds (totaling the nine-month priority, attorney’s fees and costs plus committee fees and costs) would be paid first to the association. Any amount in excess of the priority debt would then go to satisfy the first mortgagee’s debt and then the second mortgagee’s debt, if applicable. When there are funds remaining after satisfying the priority debt, the committee and the first and second mortgagees, the association could claim the balance of its debt from the remaining sale proceeds.
After having read the above, it should not surprise the reader that the collection process is a complicated matter fraught with pitfalls and risk. Common charges are the life blood of any common interest community. Every board should fully appreciate the importance of a firm, but fair system that ensures the financial health of the association. With proper planning and a familiarity with the process, boards can better serve their communities.
By: Ronald J. Barba
What are you collecting and Why does it matter?
Collections cases can vary depending on the nature of the assessments being collected. The most straight forward case involves unpaid common charges. There are other cases which require more documentation than an account statement before an action can be commenced. Cases involving the collection of fines present challenges unique to Boards and their attorneys. CIOA is very strict in its requirements involving the levy and collection of fines. Connecticut General Statutes Section 47-244 states that an association board may levy fines only after the owner has been provided notice of the violation and an opportunity to be heard. There are no exceptions to the law. Therefore, it is incumbent upon a Board to ensure that no fine is assessed against a unit owner prior to providing notice and scheduling a hearing for the offending unit owner.
Failure to follow the notice and hearing requirements of CIOA renders the collection vulnerable to attack. Courts are not willing to award associations for their failure to provide unit owners with basic due process. The subject of proper rules and enforcement would certainly take up a full article. Suffice to say that failure to follow the basic requirements of §47-244 will meet with defeat in the courtroom.
Go back to Zero.
When a unit owner is referred to association counsel for collection it is important that the arrearage be a reliable reflection of the owner’s account. One way to ensure that counsel has reliable figures is to provide an account statement which goes back to a point in time when the owner’s balance was zero. Showing a balance forward is extremely troublesome for the court when establishing the collectible debt at the time of judgment. Providing a “zero balance” statement can be a problem for associations that have recently transitioned from one property management company to another. While most companies are professional and accomplish the transfer of records in a timely and reliable manner, some leave incomplete records of payments resulting in account statements starting with a balance. Boards should be aware of this possibility when entering into new management contracts so that the contracts include provisions mandating the transfer of complete documentation.
Speaking of property managers...Increasingly, accounts that have been turned over to counsel for collection include a “transfer fee” payable to the property manager. These charges are appropriate as long as they are provided for in the management contract. It might be a good idea to include notice of transfer charges in the collection policy as well.
Set it and forget it.
Once an owner’s account has been referred out to the Association’s attorney for collection, it is best for the board not to involve itself in the matter. Too often, owners will reach out to sympathetic board members seeking relief from the collection effort. With the best intentions, Boards will veer from established collection protocols and thereby render the collection vulnerable. Some Boards accept partial payments without communicating as much to counsel. Such activity exposes association counsel to Fair Debt Collections Practices claims which can be costly.
Boards must keep in mind that they have retained counsel to deal with this very delicate and difficult issue. Permitting their attorneys to handle the collection eliminates the stress of direct confrontation with the unit owners. Allowing counsel to collect the arrearage is the most efficient avenue toward resolution. That is not to say that counsel will not and should not communicate debtor requests. Trying to manage the intricacies of Connecticut’s collection laws is best left to professionals. Once the account has been referred to counsel let it be resolved by counsel. A good lawyer will communicate with his or her board and provide regular updates. The merits of requested payment plans and other special dispensations can be discussed fully by attorney and client in executive session. If a board wishes to modify its position about a particular account, it will have ample opportunity to do so. A board should expect a periodic status of collections report from its counsel. Such a report will keep the board apprised of the progress (or lack of progress) in the various collection matters being prosecuted.
Join us next week for the third and final part of Challenges in Collections.