Over the past few years, financial stress on associations due to unpaid delinquent assessments has reached an alarming level. At Kriger Law Firm, APC the firm has adjusted its strategies for collections as previously effective methods are now less effective because of bank foreclosures, bankruptcies, high unemployment, and a depressed real estate sales market.
The traditional approach to the collection of assessments has been, and remains the assessment lien process and, if appropriate, non-judicial foreclosure. Regardless of the economic climate, homeowners who have the ability and desire to keep their homes are likely to pay delinquent assessments when the lien process threatens the loss of their homes. The opposite is also true: homeowners who have no ability or desire to keep their homes are unable or unlikely to pay regardless of the number of warnings or the imminent threat of foreclosure. This is because the majority of these homeowners will eventually lose their homes to foreclosure by their mortgage lenders.
The firm continues to recommend that its clients begin collections by pursuing the statutorily prescribed lien process: sending a debt validation notice, followed by the notice of intent to lien, recording the assessment lien, and serving the post-recordation notices including the Notice of Intent to Foreclose. The lien is important because it protects the association in the event of bankruptcy or sale of the property to a new owner.
Contact from the homeowner seeking a payment plan, bank foreclosure, and bankruptcy are three events which alter the assessment lien process. Contact from the homeowner seeking a payment plan is clearly the preferred outcome among the three. Bank foreclosure extinguishes the assessment lien, and therefore a civil lawsuit may be called for. Bankruptcy imposes the automatic stay which prevents the association from moving forward with any sort of collection activity without court permission.
The alternative to the lien process and non-judicial foreclosure is a court action, a lawsuit filed against the homeowner, either in the Superior Court or in the Small Claims Court. A collections lawsuit may be commenced at any time, simultaneously with the lien process, for example; but it is usually pursued once the lien process has failed to deliver payment or a payment plan and foreclosure is not a viable option. A court action results in a personal judgment against the delinquent homeowner, whether he or she continues to own the property or not.
If the association prevails in court and receives a personal judgment, it is effective for ten years and can be renewed. Further, the judgment can be recorded in the real property records as an abstract of judgment which attaches to any real property that the debtor has or may acquire in the future in the county in which the abstract is recorded. Lastly, judgments can very effectively be collected through wage garnishments and bank levy (or by rent garnishment if the delinquent homeowner rents out his property).
The firm's goal is to obtain payment for the association. Maintaining a sharp focus on the strategies that work has made the assessment collection department at Kriger Law Firm, APC the best in the business.