SB 1196 Includes New Remedies for Collecting Money Owed to Associations.
Community leaders and managers have complained for years about investor owner delinquencies. Why should the owner continue to collect rent from his or her tenant without paying maintenance fees and/or assessments? Sure, both the Condominium and Homeowners Acts allowed the association to apply to the Court to request the appointment of a rent-receiver, but to take advantage of that provision it had to file the foreclosure lawsuit. The law requires notices to the delinquent owner, preparation and recording of the claim of lien, filing and serving the foreclosure lawsuit – all before the association could ask the Judge for authorization to collect rent. It could take several months to obtain the appropriate Court Order – all while the account remains delinquent. In some cases the tenant moves out before the association has the chance to collect any rent. Of course there are costs and expenses involved with that whole process.
Recently (as reported on this blog in Condo Receiver Helps Collect Assessments; Q&A: Condo Receivers; Collecting Rent from Tenants; Q&A: Collecting Rent from Tenants (revisited) ) the Courts have extended the law to allow ‘blanket receiverships’ for all units subject to foreclosure – and even more recently some Orders were entered authorizing the receiver to collect rent from tenants occupying units even before the association filed for foreclosure.
Well, in response to those cries for help the legislature included a ‘self-help’ procedure for associations. The first paragraph of this portion of the new law says:
If the unit is occupied by a tenant and the unit owner is delinquent in paying any monetary obligation due to the association, the association may make a written demand that the tenant pay the future monetary obligations related to the condominium unit to the association, and the tenant must make such payment. The demand is continuing in nature and, upon demand, the tenant must pay the monetary obligations to the association until the association releases the tenant or the tenant discontinues tenancy in the unit. The association must mail written notice to the unit owner of the association’s demand that the tenant make payments to the association. The association shall, upon request, provide the tenant with written receipts for payments made. A tenant who acts in good faith in response to a written demand from an association is immune from any claim from the unit owner.
The Association must follow a specific procedure to collect rent from tenants. There are some pitfalls to avoid. Its a good idea to discuss these issues with counsel or allow counsel to send the demands on your behalf.HOA LawHomeowners AssociationsRentSB 1196