Colorado Homeowner Associations: Collecting Assessments In Tough Economic Times (Part 4 of 4)
Note: This article is part of a series. Click here to read the entire series.
In the past, collecting delinquent homeowner association assessments did not require much brainpower, effort or planning. That has changed. Strapped homeowners, behind on the mortgage and owing more than the house is worth are choosing not to pay homeowner association assessments. Homeowner associations record liens, file lawsuits and obtain court judgments for past due assessments. Yet, many homeowners refuse to pay and continue to live in the home and use association services. Needless to say, this does not sit well with the homeowners paying their assessments. The solution requires knowledge and planning by the attorney trying to collect the past due assessments. Below are some suggestions on how to improve the chances of collecting what is owed.
Properly calculate the total amount owed including all assessments, costs, attorneys fees and interest. Most lawsuits over homeowner association dues are filed in county court. The total amount owed will be the starting point for any negotiated settlement with the delinquent homeowner.
Properly identify all components of the court judgment in the judgment, itself. Judgments consist of principal, interest, costs and legal fees. Depending on the situation, breaking out these items as separate line items can mean the difference between collecting most of what is owed and not collecting much at all.
Make sure the court judgment states the interest rate and that the delinquent homeowner will owe the continuing costs of collection. Most homeowner associations have provisions in the governing documents to collect post-judgment interest and collection costs. Typically, the interest rate is between 18% and 21%. Post judgment interest is all the interest that accrues after the date of the judgment. Post judgment legal fees and costs are the legal fees and costs incurred in pursuit of collection. Those post judgment legal fees and costs are typically more than the cost of obtaining the original judgment. Failing to include those continuing collection costs in the court judgment can result in spending more than is ultimately collected.
After the court judgment is obtained, serve the delinquent homeowner with the standard, post-judgment interrogatories. In county court, along with the judgment there is a standard court order directing the delinquent homeowner to answer certain questions about the homeowner’s job and assets. Those questions are called interrogatories. Those questions must be served upon the delinquent homeowner. Should the homeowner fail to answer those questions, a motion should be filed requesting that the delinquent homeowner be found in contempt of court. While this may seem like a waste of time, now, it can be invaluable later. Failure to answer the interrogatories can result in a bench warrant issuing for the delinquent homeowner’s arrest. A simple traffic stop by a police officer can result in a trip to the county jail for the delinquent homeowner. Just one night in jail can do wonders to collect homeowner association dues.
Record the judgment in any Colorado county where the delinquent homeowner owns real property. The judgment will become a lien upon any real property owned by that homeowner for up to six years. It also makes refinancing the real property very difficult.
Calendar the expiration date of the court judgment. Colorado county court judgments are good for six years. The judgment can be extended beyond six years if it is revived prior to the expiration date. Since the delinquent homeowner will have to be served in order to extend the judgment and the order extending the judgment must enter before the expiration of the six-year period, start the process early.
Do not let the judgment expire. Do not give up. Take a long-term approach. Some delinquent homeowners just cannot or will not pay, today. Unless the homeowner files for bankruptcy, he will eventually have to deal with the court judgment. When that day comes, all the little details make a huge difference in the amount collected.
Follow the rules in homeowner association’s governing documents. The above suggestions are based upon general assumptions about governing documents. Each association’s governing documents are different and must be followed.
