Sunday, June 5, 2011

Class Action Suit Filed Against 500+ Associations for Collection Fees!

A recently filed Nevada class action is aimed at more than 500 associations who used collection agencies that, in the plaintiffs' words, "are making improper, inaccurate and/or excessive demands, through themselves or by their agents...for claimed collection fees and costs which (the HOA's) did not actually incur nor were liable for at the time of the lien or demand, and for claimed lien amounts which have been extinguished by the covenants, conditions and restrictions, or are otherwise unlawful or improper."

Every week I am asked by an association about some new pitch by a collection agency or a creative collection entity that promises "risk free" or contingency collections for the association. How does this typically work? The collection agency promises that the association will owe nothing because all fees and costs are loaded up on the delinquent owner's ledger. If they cannot collect from the owner, they won't collect from the association.

What happens, however, if the owner's ledger contains amounts that cannot properly be included on the association's lien? For starters, it can result in an action against the association and the lawyer who recorded the lien and proceeded to foreclose on same. Here is the link to the Nevada story:

Are there lawyers out there that will work with collection agencies that are loading up these kinds of "out of the box" fees on delinquent owners? There sure are. Are there other law firms and lawyers that tell those same associations that they simply cannot proceed with collection files that have questionable charges? You betcha.

Quite simply, there is usually some sort of a legal bill at the end of the road for most associations who are pursuing foreclosures against owners of properties with no equity. It is the cost of doing business for associations in today's market but hopefully it is a cost that can be recouped via renting out the property.

Remember, if it sounds too good to be true, it's probably not. The occasional Hail Mary Pass is very exciting but there is no substitute for old-fashioned blocking and tackling.

This work by Donna DiMaggio Berger, Esq. is licensed under a Creative Commons Attribution-NoDerivs 3.0 Generic License.

No comments:

Post a Comment