Thursday, April 1, 2010

Time to Tighten Up Your Current Collection Policy


As a Managing Shareholder of Katzman Garfinkel & Berger (KG&B), I have witnessed the dramatic effect that the downturn in the economy has dealt many communities here in South Florida and across the state. Unfortunately, many experts are predicting that a full economic recovery is still many months or even years away.

History has taught us, however, that there are always those who survive and even thrive in tough times! My team of community association attorneys and I started to ask ourselves: What should communities be thinking about right now in terms of saving money, recouping lost money and even making money?

Over the next few blogs, I will be discussing a few tips ranging from basic to innovative to often-overlooked, to help your community weather the current economic climate.

Rethink your traditional collection policy in light of today’s economic realities. If your collection policy was to typically send three courtesy demand letters before sending the file off to the attorney for collection, think again. The longer the delay in commencing collection efforts these days, the greater the chance that the delinquency will balloon to an unmanageable size;

If your governing documents require three courtesy letters be sent, amend that provision (more about amending your documents in the next blog);

If you traditionally stopped all collection efforts once a mortgage foreclosure was filed, think again. Many lenders are starting foreclosure actions but taking years to finish them. The reason for this is quite simple; as soon as the bank takes title it must pay the statutorily required past due amounts and start paying assessments from that day forward. For a bank, it is much better to allow you to simply maintain their collateral for them while they pay nothing in to the community;

Be aggressive with your foreclosure actions. This accomplishes several things: it sends a message to the rest of the paying members that you are doing something; it warns those who might be tempted to stop paying their assessments that you will do something, it allows the association (once it takes title) to either sell the property or lease it out short term to recoup some or all of the money owed and it allows the association to control who occupies the property and its condition.

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