The document outlines strategies for managing the collection of delinquent assessments and enforcement of covenants, conditions, and restrictions (CC&Rs) by homeowner associations. Key topics include gathering homeowner information, implementing accurate bookkeeping and collection policies, enforcing late fees, and understanding legal remedies such as personal judgments and foreclosure processes. Additionally, it discusses the implications of bankruptcy on collection efforts and the importance of timely communication and action to ensure effective resolution.

1. Welcome!
Please turn cell phones off or
on vibrate.
Thank You!


2. M
We are glad you have joined
us!
Mulcahy Law Firm, P.C.

3. Please join us in the Pledge of Allegiance


4. Secrets to Collection of
Delinquent Assessments
Enforcement of CC&Rs
Trustee Sales
&
Bankruptcy


5. Secrets to Collection of
Delinquent Assessments


6. 1. Obtain Information On Owners Upfront
 Create a form to obtain the following information from
homeowners at the close of escrow:
Bank information
Place of employment
Mortgage company
Mailing address
 Update and retain an owner’s information:
Keeping copies of an owner’s checks
Noting place of employment
Information regarding potential renters


7. 2. Accurate Bookkeeping
 Accounting records should be:
Accurate
Easily available
Reflect current charges and payments
At anytime, particularly in litigation, it is very important for
the association to be able to provide the homeowner or court
with the status of account(s).


8. 3. Collection Policies
 Collection policies in place allow:
Quick notification regarding delinquency policy and
Intended course of action
Encourage prompt payment


9. 4. Late Fees
 Late fees should:
Be uniformly and strictly imposed
Within the limits of the law
For planned communities, late fees cannot exceed $15 or 10% of
the assessment, whichever is greater.


10. 5. Communication with Owners
The association should use open and continuous
communication with owners (i.e. newsletters and demand
letters) regarding the need for timely payment of
assessments and the procedures the association will follow
in the event of non-payment of assessments.


11. 6. Timely Action
Timeliness is the key to successful collections!
 60-90 days past due record a notice of lien on the lot/unit
 Do Not Delay - provide the attorney
all pertinent and complete information on file:
name of owner, address, breakdown of charges
previous correspondence/owner and association
 After a file is forwarded to the attorney
forward all correspondence to the attorney to handle
consult the attorney for payoff amounts


12. 7. Due Diligence / Credit Evaluations
 Prior to pursuing collection, run due diligence checks:
Ownership records
Trustee Sale search
Potential Bankruptcy filings
Recorded liens
Run an address search for new mailing addresses
 Make an informed decision:
The association’s attorney should run a credit check to
evaluate the value of and risks of collection.


13. 8. Understand Available Legal Remedies
 Justice court action vs. foreclosure
 Utilizing the association’s legal remedies is often the most
successful tool for the association to collect delinquencies.


14. Personal Judgment Against the Owner
Justice Court
 Association attorney files a lawsuit against the owner and
obtains a judgment against the delinquent owner
personally
 With the judgment, the association can:
Garnish the owner’s wages, bank accounts or
Rent payments or
Levy and execute on other real or personal property


15. Disadvantages to
obtaining a personal
judgment in
Justice Court
Benefits to obtaining a
personal judgment in
Justice Court
 Fast - usually four to six
months to obtain a
judgment
 Cost efficient approximately $700 $1,000 in attorneys’ fees
and court costs
 The judgment may not be
collectible if the
individual has no assets.
 If bankruptcy filed:
debtor can be discharged
from the entire debt, and
the proceedings halted
due to the automatic stay
of the bankruptcy.


16. Foreclose an Assessment Lien on the Lot / Unit
Superior Court
 Requirements to Foreclose:
Assessments one year delinquent or
$1,200+ delinquent assessments (whichever occurs first)
 Under this option:
Association records a lien on the lot/unit and
The attorney files a lawsuit to foreclose the lien
Judgment obtained against the owner which orders a
sheriff’s sale of the lot and
A deficiency judgment against the owner


17. Benefits to foreclosure of an assessment lien
Superior Court

The delinquent owner can be evicted after 30 days or 6
months
 The delinquent owner may attempt to settle the lawsuit
 If the property is sold at the sheriff’s sale for an
amount that exceeds the judgment, the association will
recover the full amount owed to the association.


18. Disadvantages to foreclosure of an assessment
lien–Superior Court
 Estimated legal fees and court costs $1,500.00 to $2,500.00
 Approximately 6 months to 1 year
 Owner files for bankruptcy, the foreclosure or sheriff’s sale
will be halted
 Owner stops paying the mortgage, the first deed of trust
could foreclose before the association and wipe out the
association’s lien
 Owner pays within 30 days or 6 months after the sheriff’s
sale, he/she can redeem the property


19. Our firm strongly suggests
Prior to instituting legal action make an informed decision:
Research the credit history
Research status of the first deed of trust
Research financial condition of delinquent owners


20. Enforcement of CC&Rs
 Courtesy Reminder Letter
 Formal Violation Letter
Under Arizona law, after notice (the violation letter) and
an opportunity to be heard an association or board of
directors may impose reasonable monetary penalties on
members for violations of the declaration, bylaws and
rules and regulations of the association.


21.  Enforce payment of fines:
1. Filing a lawsuit against the owner
2. Obtaining a judgment against the owner
3. Recording the judgment with the county
Recorder’s Office.
 “Self-help”
 Litigation


22.  Owner responds after notification:
• By certified mail to the association
• Within ten (10) business days after notice
• Association may not proceed with action to
enforce
Association responds in writing within 10 business
days with:
1. The provision violated;
2. Date of the violation or date was observed;
3. First and last name of the person(s) who observed
the violation; and
4. Process to contest the notice.
Association may proceed


23.  Deed Enforcement, Fine and Notification
Policies:
• Adopt a deed enforcement policy
• Notify residents
• Outline the steps the association will take to
address a violation
• Reminders to the owners


24. Trustee Sales
If an owner becomes delinquent with his mortgage or deed
of trust company, the mortgage or deed of trust company
may initiate foreclosure proceedings on the owner’s
property by noticing a Trustee’s Sale.


25. Secure the association’s interests
A lien places the Trustee on notice of the association’s
interests:
 Association will receive notice of the Trustee’s sale
 Association will receive notice of excess proceeds, if
any


26. Notice of Trustee’s Sale
A Notice of Trustee’s Sale is:
 Recorded with the county recorder’s office
 Posted at the property being sold
1. Notice, sale location, contact information
2. Description and address of the property
3. Name of the beneficiary - e.g. mortgage company or deed
of trust
4. The recording number of the mortgage or deed of trust
5. The principal balance owed
6. The Trust or - e.g. the owner of the lot
7. The date of the Trustee’s Sale.


27. The Trustee
 The mortgage or deed of trust company assigns a Trustee
to manage the affairs
 The Trustee may be contacted for updated information


28. Events that may occur regarding a Trustee’s
Sale
Postponement of a Trustee’s Sale
Cancellation
Revert back to the beneficiary
Sale


29. After the Trustee’s Sale
 New Owner
 Former Owner


30. Events that require close monitoring
Owners file for bankruptcy, transfer ownership (sale)
or intend to sell the property
If the property is sold at the Trustee’s Sale and excess
proceeds are generated
If the property is sold at the Trustee’s Sale and excess
proceeds are generated, but are deposited with the County
Treasurer’s Office


31. Bankruptcy
When a homeowner files a bankruptcy (and lists an
association as a creditor in the bankruptcy), there is an
automatic stay in place, which prohibits the association
from proceeding forward with collection against the owner
or face strict and costly penalties.
 Owner’s file should be clearly flagged as a bankruptcy
file, so that no actions are taken in violation of the stay.
 Two types of bankruptcies:
Chapter 7
Chapter 13


32. Chapter 7 Bankruptcy
 A Chapter 7 Bankruptcy is generally, but not always, a no
asset bankruptcy
 If owner owes delinquent assessments, association should
file Notice of Appearance
 Monitor status


33. Chapter 13 Bankruptcy
 Called a “wage earners” bankruptcy
 Association should file a Notice of Appearance and a
Proof of Claim
 Debtor files a proposed plan in which to pay creditors
back


34. Responsibility for Post-bankruptcy
Assessments
A homeowner is responsible for all assessments, late fees
and other charges, including bankruptcy related attorneys’
fees after the date of filing.
Lift of Stay
If the owner is not paying post-petition assessments and
not responding to post-petition demand letters, the
association has the opportunity to file a motion to the
Court requesting a relief of stay.


35. Date of Filing
The date that triggers the automatic stay
Date of Discharge Chapter 7
The date the Court grants the debtor a personal discharge of
all debt owed as of the date filed for bankruptcy protection.
Date of Discharge Chapter 13
The date the Court grants the debtor a discharge of all debt
owed and not paid pursuant to the Bankruptcy Plan, as of the
date filed for bankruptcy protection.


36. Date of Termination or Closing of Case
The date that the bankruptcy case has been closed or
terminated and the automatic stay is no longer in effect
Property Sold by Owner During Bankruptcy
Term
All amounts are due and owing! A payoff should include
pre-petition debt and post-petition debt due to the
association
Dismissal of Bankruptcy
When a case is dismissed, it’s as if it were never filed


37. Join us for our Next Lunch with Mulcahy
February 6, 2014
What are the Legal
Ramifications of Board Inaction?
M
We are glad you have joined
us!
Mulcahy Law Firm, P.C.


38. If you like what we do…
please fill out one of the
Testimonial Cards on your table,
and send a YELP review
Thank You!
M
We are glad you have joined
us!

Mulcahy Law Firm, P.C.

39. “Like Us” on Face Book
By Friday, January 10th at 11:59pm to
Receive a Movie
Ticket
