Collecting Unpaid Debts Procedures to Handle Arrearages

 Consider the following all-too-common scenario: your condominium association has  one delinquent unit owner who owes three months of common charges totaling  $915.00 before late fees. Statements have been sent without response, and  telephone calls are not being answered. If you're like most buildings, your  operating expenses hinge on reliable cash inflow from owners' fees every month—and that $915.00 is being sorely missed. What steps can your building take to  collect this debt?  

 When an owner has ceased making common charge payments for at least 90 days and  fails to respond to the board's initial communication efforts, it's important  to ensure proper management of the account while the balance is still fairly  low. The first step is to refer the matter to the building's legal counsel.  Your counsel’s objective in assisting the condo at this point is two-fold: First, to take the  necessary steps to recover the amounts past due as quickly as possible, and  second, to get the owners to begin paying again—or if not, to get new occupants into the unit who will make the payments.  

 Initial Notice

 After counsel serves the owner(s) with the initial 30-day “Debt Notice” required by the Fair Debt Collections Practices Act, the account ledger should  be evaluated to determine if there have been any payments made in response to  the notice. If there are no payments made after the debt notice is served on  the owners, counsel should order a title search and immediately record a lien.  The purpose of recording a lien is to place an encumbrance on the unit for the  unpaid common charges as well as all future unpaid common charges going  forward, as long as the right to collect such future charges are noted on the  face of the lien. A properly recorded lien will prevent an owner (or a second  mortgage holder) to sell or foreclose upon the unit until all amounts due  pursuant to the lien are paid in full.  

 A title should always be ordered and reviewed prior to recording a lien. This is  extremely important, because a lien must be recorded against the proper title  owner(s) in order to be effective. Note that unit occupants may not necessarily  be title owners. A title search will confirm the correct owner(s). If a lien is  not recorded against the correct title owners, it is defective and will not be  enforceable against the unit.  


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