collections and enforcement presentation - javier b. delgado with carpenter hazelwood

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Three Homeowner Association Collection & Enforcement Scenarios

Poll - Our most difficult violations involve:

Select one:

A. Architectural violations

B. Landscaping

C. Parking

D. Pets

E. Renters

Carpente r , Haz lew ood, De lgado & Bo len , PLC

Poll - Our Enforcement Policy is to:

Select one:

A. Do nothing & hope it gets better

B. Violation letters & fines (if you have

fining authority)

C. All of the above + violation letters

from an attorney

D. All of the above + we take serious

violations to Court

E. It’s a case by case approach Carpente r , Haz lew ood, De lgado & Bo len , PLC

Scenario #1 – You’re Killing my Zen!

The Restrictions state: “Lot Owners must install

grass throughout the front yard…the Board is

authorized to impose fines…” The Fine policy

calls for graduated fines: $0/$25/$50/$100

(maximum). Shortly after moving in, the Jones

install a high end traditional “Japanese style”

rock garden. Management has sent the Jones

letters over a 3 month period demanding that

the Jones install grass as required. The Jones

are being fined at the rate of $100.00 a month.

So far, the Owners have refused to comply.


Responses

Do you:

A. Continue to fine & have management

send letters

B. Ignore it – it looks good!

C. Grant a variance

D. Confront the Jones in person

E. Authorize an attorney violation letter


Responses

Do you:

A. Continue to fine & have management

send letters

B. Ignore it – it looks good!

C. Grant a variance

D. Confront the Jones in person

E. Authorize an attorney violation letter

(Boards have a duty to enforce the

covenants)


Nonprofit Act

• N.M.S.A. § 53-8-25.1: standards of conduct for directors

• A director must perform his or her duties in good faith,

• in a manner the director believes to be in or not opposed to the best interests of the corporation; and

• with such care as an ordinarily prudent person would use under similar circumstances and in a like position.


Scenario #2 – Don’t Shed on Me

The Restrictions state: “Sheds cannot be installed

without prior approval of the Architectural

Committee…sheds cannot be higher than six (6)

feet tall… Board is authorized to impose fines & to

pursue injunctive relief…Board is authorized to

grant variances…”. Prior boards have a history of

lax shed enforcement. The new Board

commissions a shed survey. The survey notes

that the Ramones installed a shed, without ARC

approval & that the shed is 8½ fee high. The

Ramones have ignored demands to comply from

both management and the attorney.


Responses

Do you:

A. Continue to fine & send letters

B. Ignore it

C. File an injunctive lawsuit

D. Grant a variance

E. I’d do something different and I’ll share it


Responses

Do you:

A. Continue to fine & send letters

B. Ignore it

C. File an injunctive lawsuit

D. Grant a variance (& enforce new

violations consistently going forward)

E. I’d do something different and I’ll share it


When Fines Don’t Work

• Injunctive relief

• Court action to compel compliance

• Quality of life: weeds, trash cans, etc. versus

• Serious violations: architectural, health & safety

• Evidence?

• Defenses – selective enforcement/ lax enforcement

• Take corrective action going forward


Poll - Our worst collection problems involve:

Select one:

A. Frequent fliers

B. Lender owned or soon to be lender

owned properties

C. Rentals

D. Out of state owners

E. Deniers


Scenario #3 – He just won’t pay!

O’Connor has a history of not paying. The

Board has assessed his account late fees,

sent collection demand letters, recorded a

Notice of Lien against his Unit, & had the

attorney send a an attorney collection demand

letter… but he still won’t pay. O’Connor has

responded by telling the attorney “times are

tough… relax, the board will get paid when I

sell next year, when property values come

back”. The owner appears collectible.


Responses

Do you:

A. Wait it out – times “are” tough

B. Wait until the delinquent owner sells

C. Have the attorney send more letters

D. File a personal money judgment lawsuit

E. Post a “Deadbeat O’Connor” notice


Responses

Do you:

A. Wait it out – times “are” tough

B. Wait until the delinquent owner sells

C. Have the attorney send more letters

D. File a personal money judgment

lawsuit (owner appears collectible &

delay only invites expense and

complications)

E. Post a “Deadbeat O’Connor” notice


Assessment Collection

• Be aggressive

• Be consistent

• Inaction = disastrous consequences

• Waive “soft costs”

• Utilize payment agreements

• Focus on the newly delinquent


Collection Criteria

• In state? vs. out of state

• Lender foreclosure activity/lender owned?

• Current owner vs. former owner?

• Credit report?

• Bankruptcy?

• Active duty military?

• Working age vs. retired?

• How much is owed?/what is owed?


Assessment Collection & Imposition

• Regular Increases Necessary

• Inflation

• To Maintain the Status Quo of the Community

• Build Reserves for periodic replacement/maintenance

• Reserve Studies – having and funding avoids Board liability

• Avoids Special assessments


Pending Legislation

• SB 30, SB 497 & HB 210

•Codification of Board Duties

•Board removal

•Disclosure

•Lien rights

•Declarant control

•Voting

•Notice of a HOA


Questions?

Javier B. Delgado

[email protected]

505.242.4198 Albuquerque

505.466.1566 Santa Fe


mailto:[email protected]

collections and enforcement presentation - javier b. delgado with carpenter hazelwood

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