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How We Collect Community Associations' Money
The following was written for a Community Association client,
but it applied to all Community Association collection [procedures] and can be informative for Board Members:
The Association
determines a deadline for property owners’ delinquency, say 6 months in arrears (at the outset many cases were much
older if the Association had not previously used a collection agency).
Our agency receives the transmittal of a debtor or debtors.
BCA then searches various sources such as the credit bureau (Experian) for address updates, place of business or current telephones.
The information is entered into BCA’s computer. It is assigned an agency number and information is added such as amount,
date of delinquency, date assigned to BCA, our client’s account or Lot number.
Interest is added and updated
periodically, as allowed by law.
The debtor is sent a notice advising that payment is due the community association. That letter
carries the federal Fair Debt Collection Practices Act (FDCPA PL 95-109) disclaimer advising them that they have 30 days to
dispute the debt in writing. This period does not preclude us from contacting the debtor providing we don’t trample
their 30 rights, i.e. “demand” the money or use “immediately” or “now”, action words that
shorten their 30-day window.
If we receive a new address, we reset the clock and forward a new 1st
notice.
After
30 days we are free to contact the debtor in reasonable intervals or on the telephone during reasonable hours 8AM-9PM seven
days a week. Our letters are designed to educate the debtor as to the inconvenience and additional costs he will incur should
he ignore his obligation as well as the damage to his credit standing if he is a candidate to have it entered on
his Experian national credit file.
Along the way, when monthly payments are received by BCA Financial Services, they are deposited
into our trust account until our statement disbursement goes out to the association before the 10th of the following
month.
Any “direct” (to the offices of the association) payments are reported by association staff
and they appear on that same monthly combined “net” statement.
Most importantly, while collection is proceeding we rely
on the Association’s credit staff; to provide us with anything from itemized billing to previous disputes or promises.
They process and answer every question that our office asks. In turn, we stand ready to answer any collection question that
may help with the Association’s internal collection efforts.
When all effort is exhausted, a derogatory notation regarding
the debt is placed on debtor's credit file (except in the case of a written dispute) and the association is notified that
suit is recommended to effect collection. At this juncture, the Association may determine on a case-by-case basis which accounts
they will chose to sue.
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The Standards of BCA Financial Services We pride ourselves on understanding the problems and
opportunities in the collection industry. We believe our clients are the most important asset of our company, and we are dedicated
to serving your needs.
For Treasurers / Property Managers
Pennsylvania and New Jersey Community Associations continue to thank us for prompt results on
past due accounts entrusted to us for collection
These clients will save unnecessary administrative expense while returning
the formerly charge-off “losses” to the bottom line.
Some of the benefits of our collection agency: 1. Reduce bad debt losses. 2. Faster recovery / Improved Cash Flow 3. Collection personnel relieved for other duties.
4. Lesser burden on
paying members.
BCA Financial Services has been making it
possible for associations to achieve similar results.
We never charge a fee unless we collect money.
Pennsylvania Statute of Limitations
According to our Pennsylvania attorney, the statute of limitations for Community Association assessments is only
Three (3) years!
While this may not preclude us from requesting and collecting all of the money owing to
your association, if we must secure a Judgment against a delinquent debtor in court; the law will only allow us the three
years according to statute.
Be careful not to hold delinquent accounts too long, they won’t be worthless but
they’ll be worth less!
New Jersey statute: 6 Years.
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Pennsylvania Statute of Limitations
- Assessed Fees of Planned Communities
A Statute of Limitations is a rule mandated by the Commonwealth
of Pennsylvania which defines limits to the amount of thime in which a suit can be filed.
68 Pa C.S.A. ~5315(e)
explains that the statute of limitations for actions with respect to assessed fees collected by Planned Communities is limited
to three years from the date the assessment becomes payable.
This rule differs from some other types of contract
actions to collect debts where the statute of limitations is four years.
Approximate
Court Costs in Pennsylvania
As you may already know, PA costs vary by Court and
DJ (District Justice) offices. DJ costs (matters under $8,000) typically run between $100 and $150 and Common Pleas
costs (cases over $8,000) can be found on most county websites but is typically around $200 plus or minus.
Approximate Court Costs in New Jersey
New Jersey Court
Costs (For District Court-Special Civil Part) run about $85.00 for claims up to $2000.00 and $100.00 for claims from
$2001.00-$14,999.00. Cases over $15,000.00 (Superior Court) run about $350.00. These costs are enough for filing,
summons service, etc.
Approximate Court Costs in New York
Costs run about $225.00 for a consumer claim and about $225.00 for a commercial
claim.
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Unpaid Dues…A Free Ride?
Unpaid dues and assessments are a constant burden on property owners associations and a major headache for
managers and board members.
The property owner who expects a free ride by ignoring his financial obligation to the association
is, for all practical purposes, passing his debt on to his neighbors. This is the net effect, for the unpaid bill must be
absorbed and paid by the (increased) dues on the paying members.
If
allowed to go unchecked, this problem will result in a severe financial crunch as well as widespread irritation among the
paying members.
Paying
members demand and deserve nothing less than equitable sharing of the burden. In my personal experience as a professional collection agent, I was asked
to attend an open board meeting a few years ago and the opening remark from a member in attendance was “What
are you doing about the members who aren’t paying?” The answer, of course, should be “...prompt and continuing attention to the slow
payers and professional help on the seriously delinquent who are not coming forward with an effort to pay.” Such professional help may be 1) a professional collection agency, experienced
in this area of collection or 2) an attorney. Bear in mind that an attorney’s actions (especially, if not specializing
in this field), may be confined to writing a letter and suing for judgment. Also, consider that an attorney’s overhead,
being greater than that of a collection agency, necessitates fees and advanced costs greater than that of a collection agency.
While admitting to prejudice in this regard, I believe a collection agent
on the other hand will familiarize himself and his staff with the constitution and by-laws and can rationally and patiently
refute most of the standard excuses offered by delinquent members. An agency can also, if networked with the American Collectors
Association, pursue and even refer for suit, any debtor anywhere in the country. And, most important, an
agency will work on a contingent fee basis (no collection-no fee).
Bear in mind, however, that time is every debtor’s ally. The longer a debtor is allowed
to ignore a debt, the more factors against successful collection pile up; such as marital status, health or income problems,
changes of address (usually leaving no forwarding address) and, of course, the mental attitude that comes from having gotten
way with it for so long. The delinquent
member who is brought current promptly, will probably remain as a paying member versus the long delinquent member whose obligation
has piled up beyond his willingness or ability to pay and who thus becomes a drop out who completely defaults and has to be
sued.
John Debold Managing Partner BCA Financial Services
We are dedicated to our clients. We believe in one word: excellence. We think this commitment shows in all our products and
services.
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NY, NJ, PA
- "Legal Rate" of interest
New Jersey, New York and Pennsylvania also have a "legal
rate." In such states, as a general rule, if you have a contractual obligation that provides simply
for interest without a specific term, or "interest at the highest legal rate" then the "legal rate" applies.
There is also a "judgment rate." That's
the rate that final judgments bear. In states without a usury limit, there still may be a federally imposed limit because
at certain very large rates of interest.
NEW YORK, the legal rate of interest is 9%; the general usury limit is
16%.
PENNSYLVANIA, the legal rate of interest is 6%, and this is the general usury limit for loans below $ 50,000,
except for: loans with a lien on non-residential real estate; loans to corporations; loans that have no collateral above $
35,000. Judgments bear interest at the legal rate. It is criminal usury to charge more than 25%.
NEW JERSEY, the
legal rate of interest is 6%; the general usury limit is 30% for individuals, 50% for corporations. There are a number of
exceptions to this law.
PENNSYLVANIA LAND SALES While the following is a related field in
the recovery of delinquent accounts, it is not our precise field of expertise and should be further reviewed by your attorney,
it is a general guideline for Pennsylvania Land Sales. This Commonwealth of Pennsylvania
has 67 counties. Tax sales are held by the Tax Claim Bureau of each county after the county has acquired the property through
foreclosure procedures. Tax sales are held in September of each year after the property taxes have been delinquent for two
years. In the event property is not sold at the tax sale auction for the upset price then the property is held over for three
months for private sale. If the property still doesn't sell in that three-month span, the court then decides whether to
free the property of all liens against it.
When a Pennsylvania homeowner refuses to pay their property taxes
then the taxing district will sell the property to the winning bidder at annual tax sale auction.
They are called
Pennsylvania Land Sales, Tax Foreclosure Sales or Property Tax Sales.
Real Estate tax sales in Southeastern Pennsylvania
counties (other than Philadelphia) are held in September of each year. Unpaid real estate taxes become delinquent on January
1st of the year following the year when the taxes are due (for example, 2008 taxes became delinquent on January 1, 2009).
The taxing authorities return a claim for unpaid taxes to the County Tax Claim Bureau by April 1st. The Tax Claim Bureau acts
as the agent for the taxing authorities in a county. Delinquent taxes can be paid only to the Tax Claim Bureau, not to the
local tax collectors. Interest is charged at the rate of 9 percent per year.
A notice of the tax claim
is sent to the owner by certified mail by July 31st of the year after the taxes are due. The tax claim becomes absolute on
the following January 1st, but may be discharged until July 1st of the following year. The redemption period runs until the
property is sold at the public sale in September.
Upset tax sales are scheduled in September
at the county courthouse for unpaid township or borough, county and school district real estate taxes. The sales in 2008 will
usually be for unpaid 2006 taxes. Notice of the sale is given by publication in a legal publication and
in two papers of general circulation at least 30 days prior to the sale. The Tax Claim Bureau gives written notice to each
owner by certified mail. The property must be posted at least ten days prior to the sale. Mortgagees and
other lien holders do not receive personal notice of either the tax claim or the tax sale. A tax sale will not divest prior
unpaid liens of record, such as mortgages and judgments. The sale will, however, divest liens of all taxes and municipal claims,
which are included in the upset price.
Removal
From Sale
The owner or any lien creditor may, prior to the sale, pay the delinquent taxes in full to
discharge the tax claim. Alternately, the owner or any lien creditor may enter into an agreement with the Tax Claim Bureau
to pay the taxes, charges and interest in installments. The terms of an installment agreement require an initial payment of
twenty-five percent of the amount due on tax claims filed and an agreement to pay the balance in three subsequent installments,
all within one year.
Upset Tax Sale
The upset price is the minimum price for which
the property may be sold. It includes the claim for delinquent real estate taxes, corporation tax claims of the Commonwealth
of Pennsylvania, municipal claims and costs of notice and sale. Real estate taxes for the current year will usually be added.
Property may be sold at or above the upset price at a public auction sale conducted by the Tax Claim Bureau.
The
purchaser must pay the entire purchase price on the day of the sale. There are no restrictions concerning who may bid at the
public sale. The purchaser is required to pay real estate transfer taxes on the Tax Claim deed based on the fair market value
of the property.
Within thirty days after the sale, the Tax Claim Bureau sends written notice of the
sale to the owner. Within sixty days of the sale, the Bureau files a petition for confirmation of the sales by the court.
The owner may file objections to the confirmation of sale within thirty days following confirmation. The objections may question
the regularity or legality of the sale, including notice of the sale, but may not raise the legality of the taxes. After the
court has confirmed the sale, the Tax Claim Bureau executes and records a deed for the property to the successful bidder.
While Tax Claim deeds are valid, some title insurance companies will not insure them, so it may be necessary for the purchaser
to file an action to quiet title against the former owner to get insurable title.
Federal Tax Liens
If there are federal tax liens against the property, there are important considerations that must be addressed prior to
the tax sale concerning the rights of the Internal Revenue Service
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BCA Financial Services Operating Procedures and Confidentiality Statement
I personally supervise all aspects, in this office, of the operating procedures and confidentiality necessary
to comply with all state and federal laws.
A new privacy law went into effect on January 1, 2006 on which I attended a seminar in November
2005. Part of the law involves the confidentiality of debtors’ Social Security numbers as well as the proper security
and destruction of records.
As far as our operating
procedures, our first concern is the compliance with the federal law, the Fair Debt Collection Practices Act. P.L. 95-109.
After
a standard acknowledgment of a claim to your company, debtor is notified that a third party collection agency is attempting
to collect a debt. They are advised of their (Miranda, as it has become known) rights to dispute the debt.
After
the time limit (30 days) has elapsed, we attempt verbal contact while continuing mail communication, advising [them]
of the consequences of advanced collection procedures as allowed by law as ultimately directed by you, the individual client.
John Debold
BCA
Financial Services
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