Commonly Asked Questions and Answers:
Below you will find a list of some commonly asked questions and answers regarding an Association’s rights in the collection of unpaid assessments. Please clink the link below each question to continue reading the previously posted article that discusses each answer in depth.
What are some of the options an Association has to enforce its covenants to collect unpaid assessments?
When considering the various options available to an Association, the first thing a Board should do is consult their governing documents. Typically the Association’s Declaration will specifically state
what options are available to enforce the covenants. If not, Colorado law provides basic rights for most Associations, such as imposing fines or instituting a lawsuit. Note that the Colorado Court of Appeals has ruled that an Association whose declaration of covenants was unsigned did not have the right to enforce its covenants against its homeowners.
What steps does an Association have to take before the Association can fine a homeowner for violation of the Association’s covenants?
Under H.B. 1135, the Association may not fine any owner for an alleged violation unless the Association has adopted and follows a written policy governing the imposition of fines and the policy includes (1) a fair and impartial fact finding process concerning whether the alleged violation actually occurred and (2) whether the unit owner is the one who should be held responsible for the violation. If the board or committee is convinced that the violation exists, a fine may then be assessed.
Should an Association cash a check from an owner that is marked “Paid in Full” when the check was for less than the amount owed by that owner?
Before depositing the check, you have two basic options: (1) Return the check and ask for one that is not marked “Paid in Full”; or (2) Send it for deposit, knowing that it may be treated by a court as “Paid in Full”.
What are an Association’s rights regarding the collection of assessments when an owner files for bankruptcy?
In a Chapter 7 bankruptcy, if a discharge is granted to a debtor, all amounts owed to the Association on the date of filing of the Chapter 7 bankruptcy must be “written-off” as the personal obligation of the homeowner. However, the Association still has a statutory lien for pre-petition amounts owed and all amounts coming due after the filing of the Chapter 7 petition.
In a Chapter 13 bankruptcy, if a proof of claim has been filed by the Association, the debtor is required to repay the amount owed the Association at the time of the filing of the bankruptcy petition, usually over a period of three to five years. The debtor will further be required to make his or her monthly assessment payments to the Association on a timely basis.
What is an owner’s responsibility for payment of assessments during a public trustee foreclosure proceeding?
A public trustee foreclosure is instituted when an owner fails to make one or more payments on his/her mortgage. Upon default, the lender has the option of foreclosing the mortgage as a means of collecting the monies due from the owner. The amount of assessments coming due through the date the lender or redeeming party takes title to the property remains the personal obligation of the foreclosed owner.
Who is responsible for payment of assessments when an owner files for divorce?
Until the parties are divorced and the deed to the property is transferred by sale to a third party or transferred to one of the divorcing parties as part of the property division –either voluntarily or by court order – both husband and wife are responsible for payment of the assessments.
What is a “Super Lien” and how can an Association protect it from being wiped out by a foreclosure?
Although a foreclosure eliminates the Association’s lien for unpaid assessments, the Association is entitled to six months worth of budgeted assessments that have a priority superior to the lender’s mortgage, and therefore, cannot be eliminated as part of the foreclosure. If your Association’s current contact information is not listed in your Declaration, a lender foreclosure could extinguish your Association’s super priority lien. To protect your Association’s super priority lien, add the Association’s contact address to every Notice of Lien that the Association records and record a Notice of Address that refers to the Association’s Declaration and its recording information.
Once a judgment has been entered against an owner, what can be done to ensure that the Association gets paid?
The most common methods of collecting a judgment include requesting a garnishment of a homeowner’s wages (‘continuing writ of garnishment’) or funds being held in their bank/brokerage account(s) (‘bank writ’). The Association may also want to consider a receivership or foreclosure as an option to collect the outstanding debt.
What is a Receivership?
A receivership is another avenue an Association may take to collect delinquent assessments. A receivership is started by filing a lawsuit in County or District court. A receiver is an independent third party, unrelated to the Association or the homeowner, appointed by a court to take over possession and control of the property. The receiver, once appointed, will make reasonable efforts to rent the property. If the property is already rented when the receiver takes possession, the receiver is typically able to collect rent from the existing tenant in the property that would otherwise have been paid to the owner.