As Stephane Dupont previously blogged, effective January 1, 2014, Associations are required to have a new collection policy in place that complies with the HOA Debt Collection Bill (HB 1276). The new law requires collection policies to set forth certain procedures an Association must follow when collecting on a delinquent account.
At a minimum, the collection policy must set forth:
(1) The date on which assessments must be paid to the Association and when an assessment is considered past due;
(2) Any late fees and interest the Association is entitled to charge on a delinquent account;
(3) Any returned-check charges the Association is entitled to charge;
(4) The circumstances under which a delinquent owner is entitled to enter into a payment plan and the minimum terms of the payment plan;
(5) Before the Association turns over a delinquent account to an attorney or collection agency, the Association must send the delinquent owner a written notice specifying:
(a) The total amount of the arrearage, with an accounting of how the total arrearage was determined;
(b) Whether the opportunity to enter into a payment plan exists and instructions for contacting the Association to enter into the payment plan;
(c) The name and contact information for the individual the owner may contact to request a copy of the owner’s ledger to verify the amount of the debt; and
(d) That action is required to cure the delinquency and failure to do so within 30 days may result in the account being turned over to a collection agency, a lawsuit being filed against the owner, the filing and foreclosure of a lien against the owner’s property and other remedies available under Colorado law.
An Association will also be required to provide a delinquent owner with a one time opportunity to enter into a payment plan, lasting at least six months, to bring their delinquent account current. The delinquent owner must make the scheduled payment as required by the payment plan and remain current in the payment of current assessments. If the delinquent owners fails to make either the installment payment or the current assessment payment, the Association may immediately proceed with collections. This one-time opportunity to enter into a payment plan does not extend to owners who do not occupy the property and took title as a result of a default on a mortgage (i.e. public trustee foreclosure) or foreclosure of the Association’s lien.
In addition to the changes above, an Association will not be able to foreclose its lien against a delinquent owner until the balance due equals or exceeds 6 months of assessment fees. The balance can include items in addition to assessment fees such as interest, late fees, fines, attorneys’ fees, and other charges permitted to be charged by the governing documents. Also, the Board of Directors will now be required to vote and formally approve the filing of a foreclosure action on any given account and cannot delegate this responsibility to an attorney, insurer, manager or any other person.
Act Now! Don’t Delay!
Failure to have a revised collection policy in place prior to January 1, 2014 will unnecessarily delay the collections process by several weeks or more and jeopardize the Association’s ability to collect delinquent assessment fees.
Should you have any questions regarding this new law and how to protect your Association’s ability to collect assessments, please feel free to contact us.