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Florida Condo & HOA Legal Blog News & Updates on Condo & HOA Laws & Legislation in the State of Florida

Condos/HOAs & Collection Agency Fees – Who Pays?

Posted in Assessment Collection, Bankruptcy, Owner Payment Responsibility

Obviously over the past few years association leaders have had to devote a substantial amount of time, energy, effort and money to collecting delinquent assessments.  However, where there is need there is opportunity.   New businesses sprung up all over the U.S. to take advantage of this need.  Collection agencies, funding companies and others  promise condo & HOA board members they will collect money from the deadbeat owners without disturbing the association’s cash flow needs. 

Have you ever read a contract that contains something like this?

Association not responsible for fees or costs, except with prior Association approval in unusual cases or upon cancellation by Association. The delinquent Owners or other responsible parties shall pay all fees and costs incurred by [collections agency]. In the event [collections agency] is unable to collect fees or costs from the delinquent Owner or other responsible party, Association shall not be responsible for such fees or costs.

Sounds pretty good, right?  The collection agency does its thing and you sit back and wait for the money.  You don’t even need to pay attention to the charges added to the delinquent account since they are not your problem.

A new bankruptcy ruling throws a curve ball at those types of contracts.  The United States Bankruptcy Court decided in In re ANTONIO CISNEROS that charges going beyond those contemplated by statute were not collectible against the owner/debtor.   It said:

It is clear that the fees of [collections agency] are not allowable claims of the HOA because they were not costs incurred by the HOA in collecting the delinquent assessment. They are also not allowable because they exceed the amount necessary to defray the HOA’s costs; they are not costs of the HOA at all. To find otherwise opens the door to all sorts of mischief, as an HOA has no incentive whatsoever to question costs for which it is not liable and no incentive to search for services charging more reasonable costs. (Emphasis Added)

 HOA leaders need to think twice about entering into contracts that seem to good to be true.  Consider this in light of the lawsuit filed by Bank of America against dozens of HOAs over “excessive and unlawful” collections costs and attorney’s fees.  Closer to home we see banks and third party purchasers questioning substantial collections costs and attorneys fees with increasing frequency.  Judges are taking notice and seem to be more and more inclined to enter Orders based upon strict interpretations of the portions of the Condominium Act governing lender “safe harbor” protections and “joint & several liability” obligations.

For the most part, the Condos/HOAs are ultimately responsible for the actions of its agents (whether a management company, collections agency, law firm or other).  Your association may face liability as a result of what is being charged and billed on its behalf, even if it did not reap the benefit of those additional payments by homeowners.

  • jenschiller

    Is it typical for an HOA to send an attorney letter of collection when one has NEVER BEEN LATE and is less than 30 days late? I recxeived such a letter 18 days after the due date, telling me I owed late fees and a legal fee for collection, or a lien would be filed! I had been away on vacation and had somply forgot!  I had more than enough funds to pay, but never received a call or letter to remind me, just the HOA attorney’s letter. My documents and the Florida statute do not state that an HOA has the duty to remind a homeowner they are late. But, to send for legal collection when the hoemowner has NEVER been late???????  I have had some recent disputes with the HOA president and another board member.  I also record HOA workshops and meetings.  IS this a form of “payback” or harrassment?  The office HAS called or written other homeowners to let them know they were late.

    Isn’t this a form of harassmaent?

  • CathyGel

    Isles of Bayshore Club was turned over by developer March 2012 and assessments are now paid through taxes. Their website shows a Management company that use to have the contract and are now acting as a collection agency for the homeowners that were delinquent prior to 2012. The CAM company just charged the Seller $305.00 to obtain this information for his closing. This Seller had no balance and was not in collections. When we disputed this fee they said that the fee was for past due information prior to 2012. How long can they continue to charge for estoppel information after they are not in contract as the management company and acting as a collection company. Why haven’t they put liens on these homeowners if they owe the association money? Why should sellers have to pay these fees, it’s criminal. Seller had to pay 2 other CAM associations for estoppel information and those two fees were $575.00. In essence $880.00 to prove the Seller was current for closing!
    An association may charge a fee for the preparation of such certificate, and the amount of such fee must be stated on the certificate. That’s it for the language in the Fl. Statute for Estoppel fees. Does the Association even look at the fee for preparation of these letters by the Management Companies they hire, isn’t this part of the Management company’s job?

  • This issue is often debated.  On one side there are proponents to legislating the amount of the charge (setting a maximum).  Another group would like legislation prohibiting management companies from collecting the charge.  Right now the amount of the charge is a matter of contract between the association and the entity producing the estoppel.  The amount needs to be ‘reasonable’ but the term “reasonable” is hard to define.

  • CathyGel

    $305.00 would not be considered reasonable! They are not going to be happy with me but I have encouraged the seller to write a letter claiming price gouging. They have no business even charging as there are no longer any fees associated with the club, it’s been over one year.