Tag Archives: voting rights

Florida Statute 718.303: Suspend the Voting and Common Element Use Rights of Unit Owners in Arrears

Posted on March 1, 2014 | 12 Comments

Today’s topic was discussed briefly in my post on condo association collections policies; however, we have received more than one question on this issue so I am dedicating a post to it exclusively.

Along with the traditional remedies for unit owners past due in paying their maintenance fees (e.g., late fees, interest, rent garnishment, foreclosure), Florida Statutes 718.303(4) and 718.303(5) allow associations to suspend the common elements use rights and voting rights, respectively, of unit owners (and their tenants/ guests) who are more than 90 days in arrears.

What is important to note here is that this suspension doesn’t happen automatically at the 90-day mark. According to FL Statute 718.303(6), the board must vote to suspend a unit owner’s voting and common elements use rights at a board meeting and must notify the unit owner of the suspension via mail or hand delivery. These rights are automatically reinstated once a unit owner is again less than 90 days delinquent.

If your association is going to take advantage of these remedies, it is very important to do so consistently. The board should be careful not to suspend the rights of one delinquent unit owner but not another. My recommendation is to keep a permanent item on the association’s Board meeting agendas specifically for this purpose. At each meeting, as the Board reviews the accounts receivable, the property manager should provide a list of all unit owners more than 90 days delinquent that have not yet had their rights suspended. At that time, the Board may vote to suspend them. During meetings when no new unit owners have become 90+ days in arrears, the Board should simply skip this agenda item.

NOTE: As a vote to suspend rights is required per Florida Statutes, the board should be sure to list in the meeting minutes the specific units they have voted to suspend.

Regarding the common elements restriction, when possible, associations should restrict the unit owner’s access to the pool, gym, clubhouse, car wash, laundry facilities or any other amenities the property offers. For occupied units (and particularly for rented units where the tenant is restricted from using the amenities), this inconvenience can often be enough to encourage unit owners to pay their past due balance.

NOTE: The common elements suspension does not apply to limited common elements, common elements needed to access the unit, utility services provided to the unit, parking spaces, or elevators.

Regarding the suspension of voting rights, this particular restriction does not tend to do much to encourage unit owners to pay past due balances as those in arrears tend not to care enough to vote. However, it is still worthwhile as the association may reduce the total number of votes necessary to constitute a quorum of the membership by the number of voting rights suspended. This can be a difference maker if the association is struggling to obtain enough votes for their annual meeting, for amendments to the association’s documents, or for any other vote.

Let me know if you have any questions on this topic.

Best,

Ryan

Ryan Koski is a condominium homeowner in Tampa, Florida and a CPA and Attorney with Accounting Clinic, Inc. He is also a Director of VERA Property Management, a firm providing full-service community association management in the Tampa Bay Area as well as consulting, financial and legal services to all Florida community associations. 

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Florida Condominium Association Board Election Procedures: Florida Statute 718.112(2)(d) and Florida Administrative Code (F.A.C.) Rule 61B-23

Posted on January 31, 2014 | 300 Comments

The Florida Statutes, in combination with the Florida Administrative Code (F.A.C), provide specific processes and procedures relating to condominium association Board member elections. These rules have been established to ensure fair elections and to provide all unit owners interested in running for a seat on the Board the opportunity to do so. Failure to follow these procedures not only creates unit owner distrust of the Board but may also result in fines pursuant to FAC Rule 61B-21. Further, the association may be required to repeat the entire election process. This post will outline the Board election process and provide guidance on issues including search committees and campaigning.

NOTE: These rules generally do not apply to timeshare condominiums. Condominiums with less than 10 units are not obligated to follow these procedures. In order to adopt different voting and election procedures , an association must obtain a 51% affirmative vote of the membership.

Regular Board elections to fill vacancies created by the expiration of a Board term must be held at the annual meeting of the membership regardless of whether a quorum is present. Any Board vacancies not filled by an election (e.g., not enough people ran for the Board, a Board member resigns) may be filled by a vote of the remaining Board members at a duly called Board meeting.

 

The Election Process

First Notice of Election

The first notice of election must be mailed, emailed (so long as an electronic consent form has been received) or hand-delivered at least 60 days prior to the annual meeting/ election day. This notice may be part of another unit owner communication such as a routine newsletter. There is no specific format in which this notice must be given but the notice should include, at a minimum:

  • The date, time and location of the annual meeting/ election
  • Details surrounding how a unit owner may become a candidate for the Board (discussed below)
  • Details surrounding the information sheet a Board candidate may submit (discussed below)

If the association fails to properly issue the first notice, the association must restart the notification process.

Receipt of Intents to Run for the Board

At least 40 days prior to the annual meeting/ election, all unit owners desiring to be candidates for the Board must inform the association in writing of their intent to run. Unit owners may send a letter (certified mail or regular mail), an email, a fax, or hand-deliver a written statement. I recommend that the association provide an “intent to run” form for unit owners to fill out. The association must issue a written notice of receipt of the unit owner’s intent to run and may deliver this receipt via mail, email, fax or hand-delivery.

At least 35 days prior to the annual meeting/ election, candidates for the Board may submit to the association an information sheet discussing their qualifications/ reasons for running for the Board. The information sheet must be a one-sided, 8.5”x11” sheet of paper. Associations may use two-sided printing when distributing the information sheets (discussed below) to reduce paper usage.

NOTE: At 40 days prior to the annual meeting/ election, if there are fewer candidates for the Board than spaces on the Board to fill, no election is necessary.

NOTE: At 40 days prior to the annual meeting/ election, unit owners that are more than 90 days delinquent in paying a monetary obligation to the association are not eligible to run for the Board. Further, felons that have not had their civil rights restored for at least 5 years are not eligible.

Second Notice of Election

The second notice of election must be mailed or hand-delivered (electronic transmission is not is NOT an option) between 14 and 34 days prior to the annual meeting/ election day. There is no specific format required for this notice but I recommend that it include:

  • Details surrounding how to cast a vote in the Board member election (discussed below)
  • Details surrounding how to fill out and submit the annual meeting limited proxy
  • Explanations of any specific items (e.g., surplus carryover, year-end financial reporting waive down) on which the association is requesting the membership vote

Along with the second notice, the association should include:

  • The agenda for the annual meeting
  • A limited proxy for quorum purposes (if interested, consider adding the vote to waive down the year-end financial reporting requirement to the annual meeting agenda and add the vote to the proxy)
  • A ballot including only the names of all candidates for the Board, listed alphabetically by surname (ensure all ballots are consistent in appearance)
  • An outer envelope labeled with the address of the property manager OR association (wherever you would prefer the votes go) and spaces for the owner’s unit number, name and signature
  • An inner envelope with nothing on the outside (unit owners that own more than one unit should have an inner envelope for each unit they own)

If the association fails to properly issue the second notice, the association must restart the notification process.

Voting in the Election

To cast a vote in the election, a unit owner must write their name, unit number and signature on the outside of the outer envelope. They must select their chosen candidates using the ballot (nothing else is to be written on the ballot, no write-in candidates are allowed) and place the ballot in the inner envelope. The inner envelope(s) must be placed into the outer envelope and should be mailed or hand-delivered to the association/ property manager. Unit owners may cast their votes using the same process at the annual meeting up to the point that outer envelopes begin to be opened. Once a ballot is submitted, it cannot be rescinded or changed.

NOTE: F.A.C has specific rules for voting machines.

Counting Votes

The vote count must be conducted at the annual meeting in a location that is visible to all attendees. Once all ballots have been collected, the names and unit numbers listed on the outer envelopes will be checked against a list of eligible voting by an impartial committee (i.e., no Board members, candidates, or family members of Board members/ candidates). Any outer envelopes without signature shall be marked with the word DISREGARDED and not included in the vote count. Once completed, all inner envelopes should be removed from outer envelopes and placed in a separate receptacle by the impartial committee. The inner envelopes will then be opened. Any inner envelopes with more than one ballot inside should be marked as DISREGARDED and not included in the vote count. The results should be announced at the annual meeting.

NOTE: In order for an election to be valid, at least 20% of the membership must have voted. If not achieved, the association must begin the election process again.

Runoff Elections

If there is a tie vote that creates the need for a runoff election, the association must send a Notice of Runoff Election during the 7 days after the annual meeting/ election. This notice must include a new ballot listing the tied candidates’ names, the candidates’ information sheets, as well as inner and outer envelopes. All previous voting and vote counting procedures must be followed. The runoff election must be held 21-30 days after the annual meeting/ election.

Fair Election Concerns

If unit owners are concerned that the association is not going to run a fair election, an election monitor may be petitioned using DBPR Form CO 6000-9. The F.A.C requires that the greater of 15% of the membership and 6 members sign the petition.

If a unit owner wishes to challenge an election, they must do so using the Department of Business and Professional Regulation’s complaint form within 60 days of the election results.

Election Official Records

The first notice, second notice, intents to run, information sheets, envelopes, and ballots (including those marked as DISREGARDED) are considered official records of the association and must be maintained for at least one year from the date of the election.

Search Committees and Campaigning

The F.AC is very clear that committees designed to officially nominate potential candidates for the Board (“ nominating committees”) are strictly prohibited. That being said, there is no reason why a Board can not put together a search committee responsible for identifying unit owners that may be good Board members and discussing with them the possibility of running for the Board. Further, there is nothing prohibiting current Board members or the association manger from encouraging certain unit owners to run for the Board.

Campaigning for Board elections is allowed per the FAC and the Florida Statutes; however, it is in the best interest of the Board so set up some guidelines regarding campaigning. For example, the Board may identify certain areas (e.g., an information board in a common area) that candidates can post campaign ads so as to avoid a candidate papering the property with “Vote for Me” posters.

NOTE: The community’s manager should remain impartial as it relates to Board elections. If your manager is telling unit owners how to vote in an election, consider submitting a complaint to the DBPR regarding their behavior.

If you have any questions about the above process, do not hesitate to comment or send me an email. Templates for any of the notices or forms discussed above are available upon request.

Emily

Emily Shaw is a condominium homeowner in Tampa, Florida and a Director of VERA Property Management, a firm providing full-service community association management in the Tampa Bay Area as well as consulting, financial and legal services to all Florida community associations. 

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Florida Condominium Association Rules & Regulations: Drafting a Violation Policy and Issuing Fines

Posted on November 7, 2013 | 61 Comments

Every condominium association’s Declaration of Condominium and Bylaws incorporate rules and regulations that homeowners (and their tenants and guests) are obligated to follow. Further, most association Governing Documents allow for Boards of Directors to establish additional reasonable rules and regulations (through a Board vote at a properly called meeting) so long as they do not conflict with anything in the Governing Documents. The Governing Documents are often very long, a bore to read, and confusing for many homeowners. Add to that the variety of different rules the Board adopts and it is not surprising that most homeowners don’t know all the rules they are supposed to follow.

While there is no specific Florida Statute that outlines how rules and regulations adopted by the Board must be communicated, I strongly recommend that each association consider a method for routinely and thoroughly communicating the rules to homeowners and other residents. My preferred method of accomplishing this is by drafting a comprehensive Rules and Regulations document that is accompanied by a Violation Policy, outlining how violations are identified, the consequences of a violation, and the means of appealing a violation. We will go into more detail about the Violation Policy later in the post.

There are several reasons why drafting a current Rules and Regulations document with an associated Violation Policy is so important:

1.     Residents are more likely to follow rules if they know them.

2.     Residents are more likely to follow rules if there are consequences associated with violating them.

3.     For associations that are professionally managed, the Violation Policy provides a clear outline for the management company to follow when identifying violations, sending violation letters, etc. This transfers the control of rule enforcement from the manager to the Board, which is essential as management companies often fail to customize policies such as these to each property they manage.

4.     For self-managed associations, the Violation Policy provides the Board a consistent way to enforce the association’s rules, helping to avoid homeowner/ resident claims of personal bias.

The Rules and Regulations along with the Violation Policy should be (1) updated anytime a new rule is passed, (2) reviewed at least annually by the Board, (3) included on the association’s website, (4) provided to new homeowners and residents, and (4) disseminated to the homeowners and residents (via email or snail mail) at least annually but also every time a change has been made.

Components of the Violation Policy

At a minimum, the Violation Policy should include the following sections:

1. Fines Associated with Rule Violations: Often, Boards will choose to have increasing fines for multiple infractions. For example, the first violation may just be a warning, the second a $25 fine, and the third and subsequent violations a $50 fine. The fine can be determined by the number of violations of a unique rule committed by a homeowner/ resident, or by the aggregate number of total violations committed by a homeowner/ resident. It’s up to the Board. However, it is imperative that any fines issued by the Board comply with the association’s Governing Documents and the Florida Statutes. Certain Governing Documents do not allow for fines or have specific rules regarding the issuance of fines.

Florida Statute Rule Regarding Fine Amounts: According to Florida Statute 718.303(3), the Board may issue fines for violations of the association’s rule and regulations. A fine may not exceed $100 per violation; however, an additional fine up to $100 may be levied for each day a violation continues. Fines for a particular violation may not exceed $1,000 in aggregate. Florida Statute 718.303(3)(a) allows the association to suspend a resident’s common elements (i.e., amenities) use rights for a “reasonable period of time” as consequence for failing to abide by the rules and regulations.

2. Corrective Action Time Frame: If a violation requires corrective action on the part of the resident (e.g. a resident’s window shades are not an approved color so the resident will receive a fine AND must remove the shades), the Violation Policy should specify how long the resident has to correct the violation before a subsequent fine is assessed. Further, the policy should outline the action the association may take if a violation requiring corrective action continues for an extended period of time (e.g. the resident refuses to take down the shades). Florida Statute 718.303(1) allows the association to bring legal action against a homeowner or other resident for failure to comply with the rules and regulations.

3.     Violation Identification Process: How a violation must be identified and documented should be detailed. These rules should be drafted to eliminate any possibility of bias against a specific homeowner/ resident as well as “he said, she said” situations. A detailed and consistently implemented violation identification process reduces the likelihood of appeal. Sometimes the Governing Documents, often for violations relating to pets or noise, will have a process pre-established; however, in most instances this is not the case and it is up to the Board to create reasonable guidelines. Here are a few recommendations:

 a.     For visible violations (e.g., storing unapproved items on a balcony), a violation should be captured through a clear photograph of the violation for the association’s records (the ideal way), or by written confirmation that the violation exists by TWO designated persons (i.e., the property manager and the Board). I personally recommend that only the property manager or a Board member be allowed to identify visible violations. If a homeowner/ resident notices a violation, they should inform the property manager and/ or Board member(s) for verification.

b.    For noise violations (e.g., loud music, dog barking), a sound recording of the noise should be taken by a designated person (or by the complaining homeowner/ resident) for the association’s records (the ideal way). If this is not possible, written confirmation of the noise should be obtained by TWO persons (i.e., the property manager, the Board members, or residents).

4.     Non-Homeowner Residents: The policy should specify how violations are handled when they are committed by non-homeowner residents (e.g., tenants, guests). It is my recommendation that the policy clarify that all non-homeowner residents are required to abide by the rules and regulations of the Association and may be assessed fines if they fail to do so. To encourage homeowners to thoughtfully select non-homeowner residents, and to encourage homeowners to inform them of the rules and regulations, the policy should specify that homeowners are ultimately responsible for any unpaid fines incurred by their non-homeowner residents.

5.     Violation Appeal Process: The policy should outline the process homeowners must follow to request an appeal of a violation. This process should include whether or not non-homeowner residents are entitled to request an appeal or if requests must be made by homeowners.

Florida Statute Rule Regarding Fine Appeals: According to Florida Statute 718.303(3)(b), the association must provide homeowners 14 days written notice prior to imposing a fine during which time the homeowner may request an appeal. An Appeals Committee must be established for the purpose and no Board members may be on the committee. If the Appeals Committee does not agree with the proposed fine, the association may not impose it.

6.     Violation Letter Template: To ensure consistency, the Board of Directors may wish to draft a violation letter that the property manager, administrative assistant or Board member responsible for issuing violations should use to communicate all violations.

7.     Failure to Pay a Fine: The consequences for failure to pay a fine should be outlined in the policy. Per Florida Statute 718.303(3), the Association may not lien a unit if a homeowner fails to pay a fine; however, the association does have the ability to suspend a homeowner’s (and non-homeowner resident’s) common element use rights and voting rights. Further, the association may choose to use a collections agency to collect past due fines. Lastly, so long as the Governing Documents do not prohibit such action, the association may prevent the homeowner from renting their unit if past due fines have accrued.

Florida Statutes Rule Regarding the Suspension of Voting Rights and Common Elements Use Rights: Pursuant to Chapter 718.303(4) and 718.303(5), the association may suspend the voting rights and common elements use rights of any homeowner that is more than 90 days past due in any monetary obligation due to the association. These suspensions must be approved at a Board meeting and the homeowner must be notified in writing of the suspension.

Once the association has begun issuing violation letters and associated fines, the association should maintain a violation log to keep track of violations, fines, appeal status, fine due date, and date of fine payment.

I hope this information has been helpful. As always, I recommend all policies be reviewed by the association’s attorney prior to implementation.

Emily

Emily Shaw is a condominium homeowner in Tampa, Florida and a Director of VERA Property Management, a full-service community association management and consulting firm serving the Tampa Bay Area.

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Your Florida Condominium Association’s Collections Policy and Procedures

Posted on August 3, 2013 | 14 Comments

One of the most important responsibilities of condominium associations is to actively collect maintenance fees from each homeowner. To avoid various legal and reputational issues, Boards of Directors must be sure that the process the association uses to collect maintenance fees is consistently applied. Many associations prefer to leave the majority of their collection efforts to their attorney; however, with a thorough collections policy in place, the Board of Directors (or the property’s manager) can easily handle the majority of the association’s collection efforts, which, in turn, can materially reduce the association’s collection-related expenses.

The association’s documents (i.e. Declaration and Bylaws), along with Florida Statutes Chapter 718, provide various collection methods for Boards to use in an effort to keep past-due maintenance fees to a minimum. These tools provide the foundation for successful collection efforts and will be discussed in detail below. We will only be focusing on past due maintenance fees in this blog post and will not be talking about fines, utility bills or any other monetary obligations of homeowners to associations.

I strongly recommend that prior to implementing a new collections policy, the Board have the association’s legal counsel review the policy. Further, I recommend the Board update and re-approve this policy annually to ensure continued compliance with Florida Statutes.

Maintenance Fees

The collections policy should specify how frequently (i.e. monthly, quarterly) and on what date (typically the first day of the month or quarter) maintenance fees are due.

Late Fees and Interest

Most associations’ declarations or bylaws outline whether or not late fees and interest can be charged to homeowners that have accrued past due maintenance fees. If your documents silent on the amount of interest that can be charged, Florida Statute 718.116(3) specifies that interest should accrue at 18% per year. Further, 718.116(3) allows for a late fee for each delinquent payment of up to the greater of $25 or 5% of the monthly/ quarterly maintenance fee.

The Board should determine when and how they will apply interest and late fees to a delinquent homeowner. More specifically, by what date each month must the homeowner have paid their monthly maintenance fee, in full, to avoid accruing a late fees and interest? Will interest begin accruing immediately upon the homeowner’s account becoming delinquent (i.e. after their first missed payment) or will the association wait unit some later date (e.g. after the account becomes 90 days past due) to begin accruing interest? The relative difficulty of properly calculating and accounting for accrued interest should be considered when making these decisions.

The Board should also determine a procedure for waiving late fees and interest in certain situations. For example, the Board may include in its policy that the late fees and interest associated with a homeowner’s first delinquent payment may be waived upon request of the homeowner but that all other late fees and interest may not be waived. Or, they may decide that late fees and interest will never be waived except as part of a settlement or payment plan approved by the Board (we will discuss this more below). Again, it is very important that these rules be applied consistently. The Board must take care not to provide special treatment to certain homeowners based on personal relationships.

Delinquency and Pre-Lien Letters

The association’s strongest weapon against maintenance fee delinquency is their right to lien and foreclose on a unit if the homeowner fails to make maintenance fee payments when due. As such, the lien and foreclosure process should be included in the collections policy.

When a homeowner fails to make a maintenance fee payment when due, the homeowner’s account becomes delinquent and most associations will send a letter to the homeowner informing them of the past due balance on their account (including all late fees and interest accrued) and the next steps the association will take in the event the homeowner fails to pay. This letter should include a copy of the homeowner’s ledger (supplied from the association’s accounting program) and a date by which the homeowner must pay all past due amounts to avoid additional fees. The collections policy should specify when these letters are sent (i.e. how many days after the homeowner’s account becomes delinquent) and through what method(s) they are communicated (e.g. email, USPS).

As required by FL Statute 718.121(4), the association must provide a notice of intent to file a lien (f.k.a. pre-lien) to the homeowner. This notice should also comply with the Fair Debt Collection Practices Act. The above mentioned delinquency letter may serve as the association’s pre-lien letter or the association may send a separate letter to the homeowner. If you would prefer to send a second letter as your pre-lien notice, the collections policy should specify when these letters are sent (generally some point in the second month of delinquency) and through what method(s) they are communicated (e.g. certified mail, return receipt requested as required by FL Statutes).

Lien Filing and Foreclosure

If delinquency and pre-lien letters failed to encourage a delinquent homeowner to cure the past due balance on their account, the association may choose to have their attorney file a lien on the unit. Filing a lien (which is only good for one year) is a prerequisite to foreclosure. If the association has chosen not to foreclose on any units, it may not be worth accruing the attorney’s fees to file a lien. The collections policy should state when the association will direct its attorney to file a lien against a unit (generally when the homeowner is more than 90 days delinquent), and what information should be provided to the attorney at that time.

Whether or not to foreclose a lien (which typically results in the association taking title to the delinquent unit) should be discussed on a case-by-case basis with the association’s attorney as there are many factors to consider including whether the unit is owner-occupied, rented or abandoned, and if there is a mortgage foreclosure case in process. Most importantly, the association should consider if they intend to rent the unit after they have taken title to it through foreclosure. While acting as a landlord can be time consuming for associations, the rental income earned often more than covers the past due fees owed by the old homeowner. The collections policy should outline the broad scenarios in which the association would foreclose on a unit.

Amenities Restrictions

Florida Statute 718.303(4) allows associations to suspend a homeowner’s (and their tenants’ and guests’) right to use the common elements of the property if the homeowner is more than 90 days delinquent in paying their maintenance fees. When possible, associations should use this to their advantage by restricting the homeowner’s access to the property’s pool, gym, clubhouse, car wash, laundry facilities or any other amenities the property offers. For occupied units (and particularly for rented units where the tenant is restricted from using the amenities), this inconvenience can often be enough to encourage homeowners to pay their past due balance. The collections policy should specify which amenities would be restricted as well as how and when they would be restricted. According to FL Statute 718.303(6), the Board must vote to suspend a homeowner’s right to use the common elements at a Board meeting and must notify the homeowner of the amenities restriction via mail or hand delivery.

Lease Restrictions and Rent Garnishment

If a property’s declaration or bylaws allows the Board to approve or deny a proposed lease of a unit, FL Statute 718.116(4) allows Boards to deny a proposed lease of a unit due to a homeowner being delinquent in the payment of maintenance fees. Preventing homeowners from leasing their units is a very important tool for associations and, if allowed by the property’s documents, should be included the collections policy. The policy should specify when a homeowner becomes ineligible to lease their unit, how they are informed of their inability to lease their unit, and what will happen if a unit is leased by a homeowner that is ineligible to lease their unit.

Rent garnishment is the association’s primary weapon against homeowners with past due maintenance fees that are renting their units. Florida Statute 718.116(11)a allows the association to demand that the tenant make lease payments directly to the association until all past due maintenance fees have been paid. Further, if the tenant refuses to make payments to the association, the association may sue for eviction of the tenant. The collections policy should specify when the association will attempt to rent garnish and the process for doing so (the FL Statutes provide specific details on how the tenant and homeowner must be informed). Further, the collections policy should specify when the association would begin eviction proceedings should the tenant fail to make lease payments to the association.

The leasing section of the collections policy should be reinforced by a separate and distinct Leasing Policy (to be discussed is a separate blog post).

Voting Rights

Florida Statute 718.303(5) allows associations to suspend a homeowner’s voting rights if the homeowner is more than 90 days delinquent in paying their maintenance fees. This particular restriction does not tend to do much to encourage homeowners to pay past due balances as those with past due balances tend not to care enough to vote. However, it is worthwhile for the association to include suspending homeowners’ voting rights in their collections policy as the association may reduce the total number of votes necessary to constitute a quorum of the membership by the number of voting rights suspended. This can be a difference maker if the association is struggling to obtain enough votes for their annual meeting, for amendments to the association’s documents, or for any other vote. Similarly to the common elements restriction, according to FL Statute 718.303(6), the Board must vote to restrict voting rights at a Board meeting and must notify the homeowner of the voting restriction via mail or hand delivery.

Payment Plans

If a homeowner has accrued past due maintenance fees and would like to avoid having the association foreclose on their unit, they may wish to establish a payment plan with the association. While each payment plan approved by the Board may be customized for each homeowner, the collections policy should establish the basic guidelines for when the Board may consider a payment plan, how the homeowner should request a payment plan, how a payment plan is approved, who (the association or its attorney) will receive the payment plan installments, whether or not late fees and interest continue to accrue during the implementation of the payment plan, and what will happen if the homeowner fails to abide by the payment plan (typically foreclosure). The collections policy may also want to specify that the Board will not accept any payment plans that reduce the total amount owed by the homeowner.

 Settlements

A homeowner with past due maintenance fees may wish to come to a settlement with the association where by they would negotiate with the association some reduction in the amount owed. This typically occurs when the homeowner is looking to sell their unit. The Board will typically negotiate settlements on a case-by-case basis but some basic guidelines can be included in the collections policy including when the Board may consider a settlement, how the homeowner should request a settlement and how a settlement is approved. As I have mentioned before, consistency is key. Whatever the logic the Board choses to use in determining if a settlement is acceptable, they should be sure to apply that same logic to all homeowners and not allow personal feelings enter into the decision making process.

Repayment Order

The collections policy should specify how payments are applied to a homeowner’s past due balance. More specifically, Florida Statute 718.116(3) specifies that payments should first be applied to interest, then to late fees, then to attorney’s fees and costs associated with collection, and then to the delinquent maintenance fees.

Verbal Communications

The collections policy may want to specify the situations in which a member of the Board or the association’s manager will actively reach out (via phone or email) to a homeowner with past due maintenance fees in an attempt to encourage the homeowner to pay. An appropriate time to do this may be prior to the Board voting to lien and foreclose on the property as there is no point in accruing additional legal fees if the homeowner is planning to make payment in full in the coming days or weeks. Further, it may be wise for a representative of the association to offer the homeowner a payment plan, as the homeowner may not have realized this was an option. In my experience, actively communicating with homeowners makes collection efforts more successful.

This post addressed all of the key components of a quality collections policy. If your Board does not have a collections policy, I strongly recommend this be an agenda item at an upcoming Board meeting. If you have any questions or would like our assistance in drafting a collections policy for your property, feel free to reach out to us.

Ryan

Ryan is a Florida condo owner and a director of VERA Property Management, a condominium and homeowners’ association management and consulting firm. VERA will gladly draft a Collections Policy (including delinquency letters, pre-lien letters, rent demand letters and all other relevant notices) for your Association based on the desires of the Board, your association’s declaration and bylaws, as well as the Florida Statutes.  Please contact us today for a quote!

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