A receivership can be a useful tool for associations to collect delinquent assessments and fees against homeowners whose property is tenant-occupied or vacant. Assuming there are paying tenants, the process is typically smooth and the association recovers its delinquents assessments together with the costs of the receivership. In some cases, however, the tenants refuse to pay their rent or pay reduced rent to their landlords if they are Section 8 qualified. The former situation allows the receiver to evict them for non-payment, but the later presents a problem.

An article in the SunSentinel reported that the Willoughby Estates Homeowners Association in Lake Worth, Florida was presented with such a dilemna when it filed a receivership lawsuit and was faced with collecting rental income from a Section 8 tenant. The tenant was only paying $275.00 of the $1,784.00 in rent owed each month with the remainder subsidized by the county Housing Authority. Not a bad deal if you ask me! The association, however, had other plans and demanded that the Housing Authority forward the rent that it sent to the landlord each month. Interestingly, the Court agreed and required the Housing Authority to forward all future payments to the association until it was paid in full.

The decision, of course, is not binding here in Colorado but does open the window for a similar argument to be raised in our courts. Since the premise behind a receivership is to divert the rental income from a delinquent owner to the Association, it certainly makes a lot of sense.

The following is a list of suggestions which will help ensure that your receivership lawsuit is a success:

  • If possible, maintain a list of units/homes that are tenant occupied or vacant; note the names of any tenants.
  • If a delinquent account is turned over for collections, communicate the occupancy status to the collecting attorney.
  • Maintain a collection policy that permits the ex parte appointment of a receiver.
  • Turnover delinquent accounts to collections as quickly as permissible to ensure that a property does not enter into foreclosure before a receiver is appointed. Not many potential tenants want to sign a lease on a property in foreclosure.
  • If a property has covenant violations, bring those to the attention of the receiver and collecting attorney since compliance may be achieved immediately or, at least, more easily with the assistance of the receiver.