If your condominium association has unit owners that have become past-due in the payment of their monthly assessments the Board must decide how to proceed. As a board member it is your legal duty to protect the financial health of the condo association.

While many board members find this uncomfortable, in some cases this means taking legal action against a delinquent unit owner. This involves using the courts to force repayment of the owner's unpaid assessments.

If no action is taken, the eventual outcome is often that the other unit owners will need to pay for the owner's unpaid assessments.

Board members are often misinformed and believe that some entity, a bank for example, will eventually come to the rescue and pay for the owner's unpaid assessments. This will not happen. If you take no action and do not collect the funds from the current unit owner, your Association will never recoup these funds.

While there are legal payment plans that are submitted to the court and are legally binding, this section is referring to non-legal payment plans. An example of a non-legal payment plan would be a delinquent unit owner signing a board-drafted document promising to pay the balance of his or her unpaid assessments over the next 12 months.

Regardless of the language or terms used in this type of document, it is not legally enforceable. In our opinion payment plans of this type should be avoided.

The simple truth is that payment plans rarely produce results for the Association. The owner "promising" to pay, rarely does. Once this occurs the Board has no option but to start at square one and hire an attorney to issue a 30-day Demand Letter. The payment plan means nothing since it cannot be enforced and does not bypass the requirement for the 30-Day Demand letter. In practice, payment plans simply buys the unit owner time.

If we think logically about a payment plan it is fairly obvious why they don't work. You are dealing with an owner that has a proven track record of being unable or unwilling to pay his or her monthly assessment. Now you are asking the owner to not only start paying their normal monthly assessment, but also "add on" some portion of the past due balance to their monthly payment. What odds would you give the success of the plan?

Ultimately all unit owners are already on a payment plan; it is the monthly assessment schedule. Since any agreement drafted between the Board and delinquent unit owner cannot be legally enforced, a payment plan is a risky proposition for the Board. If the owner fails to adhere to the plan the Board has lost critical time within the period available to recoup these funds.

If the owner pays the past due balance specified in the demand letter, within the 30 days provided, the matter is settled. Since the owner's balance would be settled there are no further actions available to the Board. If the owner becomes delinquent in the future the process would need to start over. (New 30-day demand letter)

If the owner's debt is not paid within the 30 day period outlined in the 30-day Demand Letter, the board can file a law suit asking the courts to grant possession of the owner's unit to the association. In short, the Board would be asking to control the unit until the owner's balance has been paid in full. When temporary possession is granted by the court, the owner will be evicted from his/her unit and the association can rent the unit to pay off the owner's balance. Renting the unit is a mechanism available to recoup the owner's past-due funds, but the Board is not required to do so.

Should the unit already be rented to tenants, the association can ask the court to force all rental payments to be paid directly to the association. All legal and applicable management fees can be added to the owner's balance should this level of action be required. The cost of a possession case is roughly $3,000, but this can vary widely based upon the owner's defense and the number of court appearances required. The duration of time before the Board is granted possession of the unit also varies. Assuming the case is successful, possession is typically achieved 6-12 months from the filing of the case.

There are many details related to a possession case which are outside of the scope of this article. Our legal partner, Kovitz Shifrin Nesbit, has created a collections overview that explains the association's options in more detail. We have made this available to our clients here: Collections Overview