For those who live in a community with a homeowners association (also referred to in Virginia as a “property owners’ association” or a condominium association) (an “Association”), you are no doubt familiar with assessments that go toward landscaping, parks, and pools, and declarations and bylaws that govern architectural changes to the exterior of the homes. How strictly these are enforced may go to the nature of the people serving on the board of the Association, or it may be due to the rights included in a development’s founding documents: Declaration, Articles of Incorporation, and Bylaws. What can be enforced by law and in what manner starts with an examination of these documents.
So what should an Association do when a homeowner refuses to pay assessments or fails to maintain a property? Generally, attorneys will advise that litigation should be a last resort as it can be time-consuming, costly, and cause ill-will among neighbors. However, there are times when litigation is necessary for the betterment of the community, the financial strength of the Association, and in support of an Association with a reputation for enforcing its rules.
During times of economic uncertainty, some Associations may be less rigid in collecting assessments or enforcing maintenance requirements in consideration of members juggling a loss of income, childcare, and other expenses. At some point, however, the health of the Association and community requires collecting assessments and enforcing the Declaration and Bylaws.
In deciding how to proceed with collections of delinquent assessments, the Association will want to consider whether the Declaration allows for charging or assessing the delinquent homeowner some or all of the attorney’s fees incurred in the collections effort. If it does, then the Association will likely want to undertake more aggressive collections action than if it doesn’t. It often makes sense to have an attorney review the governing documents and formulate a plan on debt collections. As an example, some Associations will use the following steps in attempting to collect delinquent assessments:
- The Association sends a letter to the delinquent property owner requesting compliance within 30 days.
- The Association has an attorney write a letter to the delinquent property owner requesting compliance or stating that the Association will be advised to file a lawsuit.
- The Association files a Memorandum of Lien on the subject property, thereby recording a written notice of the delinquent amount in court records, which serves to “perfect” the Association’s lien, thereby giving it more preferential treatment in the event of a foreclosure or similar event.
- The Association will often want to file a lawsuit against the delinquent owner too (in Virginia, the lawsuit is commonly referred to as a “Warrant in Debt”). This Warrant in Debt is then served on the property owner to appear in court on the “return date” to answer to a judge whether the debt is owed or denied.
- On the return date, if the property owner appears and admits the debt, the judge will enter a judgment against the owner. Thereafter, the owner and the Association may attempt to work out a payment plan in order to avoid the need for the Association to undertake more active collections measures. If the owner denies the debt is owed, then the judge will set a trial date to resolve the dispute. If the property owner does not appear, the Association can request a judgment for the delinquent amount.
- The HOA should mail the judgment order to the property owner, requesting compliance with the Order within a specified timeframe, usually 30 days.
- If the property owner fails to pay the judgment, then the HOA can issue a summons for Debtor’s Interrogatories where the property owner is required to appear in court to answer a series of questions under oath directed at finding sources of income and assets of the property owner that can be used to satisfy the debt. If the property owner fails to make payments, then the Association can issue a garnishment of the property owner’s wages or other sources of money.
- If the property owner fails to appear for the debtor’s interrogatories, the HOA may make a Motion to Show Cause why the judge should not hold the property owner in contempt of court.
- If the property owner fails to appear in court at the return date for the Show Cause motion, the judge may issue a capias (arrest warrant) for the property owner. It’s important to keep in mind that no Association has the authority to seek an owner’s arrest for failing to pay assessments; rather, a judge (and only a judge) is permitted to issue a capias if an owner disobeys the judge’s order by failing to appear at a Show Cause return date.
The right approach for collecting the debt often depends both on an Association’s governing documents and the circumstances of the property owner. An Association would be well advised to review its options with legal counsel in order to develop a solid plan with successful results.