CAI-NJ May 2017

GETTING THE MOST BANG FOR YOUR BUCK: Efficiently and Effectively Using Association Legal Counsel in the Collection Process By Loren Rosenberg Lightman, Esq. Hill Wallack LLP

A s community associations continue to grapple with the ongoing struggle of collecting past due amounts owed on owner accounts, the question of when and how to resort to association counsel continues to loom over boards and managers. After all, while the fees and costs incurred during the collection process are assessed to owner accounts, the reality is that associations do not always recoup all of those charges – some or all of which

ments to an association’s budget. So the question is: when does it pay to resort to counsel and pursue account arrear- ages and when should an association cut its losses and/or take matters into its own hands to collect? At the outset, one of the easiest and most valuable, cost-effective contributions counsel can make is to assist the association in drafting and adopting a resolution setting forth a clear and concise collection policy. This policy should include specific timelines for when and at what point unpaid accounts will be sent to counsel (and thus incurring additional fees), how communications with delinquent owners will be handled and how payments will be applied to the remaining unpaid balances. Having a clear, stated policy in place will provide consistency to the current board as well as to future boards and will place the owners on notice as to what additional charges may be incurred as a result of missed or delayed payments. Once adopted, the policy should be effectively communicated to all owners (and provided with other relevant information to new owners upon taking title to a unit) so that they are aware of their responsibilities going forward. One key element of a successful collection practice is the referral of unpaid accounts to legal counsel as early in the process as is practicable. Delaying the referral of an account can render it more difficult for the association to collect, which is also likely to reduce the options available to recoup the unpaid balance without expending addi- tional (and sometimes uncollectable) legal fees. An early referral will allow counsel to consider a greater number and variety of collection actions and leave an association with options to take action before other intervening events, such as a bankruptcy filing or a mort-

must ultimately be written off as bad debt. Those loss- es are then absorbed by the remaining owners by way of increased as ses smen t s or by adjust-

gage foreclosure. Every collection matter varies in scope and nature.

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