J & N REALTY, INC.

Advanced Assessment Collections Practices  

Collecting Delinquent Assessments: an overview of the basics 

•Civil Code Section 1366 & 1367.1 

•Declaration of Covenants, Conditions & Restrictions 

Assessment Collection Methods 

•Small Claims 

•Judicial & Non-Judicial Foreclosure 

•Effective Pre-lien Practices and Procedures 

•In Limbo: Between Lien and Foreclosure 

•Motivating Owners to Pay: 

–Discipline and suspension 

–Assignment of rents 

–Restricting Use of common area facility  

Board Discretion In Assessment Collection Matters 

•Duty to Levy and Collection Assessments 

•Corporations Code Section 7231 

•Duty to Act 

•The Decision Not To Act: 

–Beehan v. Lido Isle 

The Foreclosure Decision 

•The Trickledown Effect 

•Exposure to Liability for Action or Inaction 

•Assessing the Needs and Realities of YOUR Community in a Given Economic Climate 

Does THIS Foreclosure Make Sense? 

•Equity in the Property 

•Lender Reconnaissance  

•Condition of Property 

•Anticipating Possible Post-Sale Outcomes  

Bankruptcy Considerations 

Chapters 7, 11 and 13 

•Dismissal v discharge 

•Securing the debt –proof of claim 

•Scope of automatic stay 

•Obtaining relief from stay 

You Own It - Now What?  Post Foreclosure Realities 

•Subject to Senior Mortgage 

•Financial Obligation of Ownership 

•Maintenance Obligations 

•Liability Associated with Ownership 

Additional Post Foreclosure Considerations 

•Deed In Lieu of Foreclosure 

•Sell Property 

•Lease Property 

•Tenant In Possession 

–Rent Skimming Concerns 

–Landlord/Tenant Relationship 

–Property Maintenance & management 

–Assignment of Rents  

•Authority 

The Senior Lender as Owner 

•Payment of Assessments 

–Pursuing collection against bank 

•Property Maintenance and Repair 

–Enforcing CC&Rs against bank 

–Notice and disclosure 

–Self-help; entering property to repair and maintain 

–Use of governmental agencies 

–Importance of paper trail 

Short Sale Considerations 

•What is it? 

•Risks and Responsibilities In Short Sale 

•Due Diligence: evaluation tools and techniques 

•Effective Short Sale Strategies 

GOING FORWARD: Assessment Collection Best Practices  

·         Re-evaluate Collection Policy and Practices 

·         More Proactive Delinquent Assessment Account Oversight and Management  

·         Improve Communication with and Education of Owners about Assessment Obligation and Collection Procedures 

Civil Code Section 1366 & 1367.1  

Governing documents  

Duty to levy assessments  

Duty to collect  

Options for Collecting Assessments  

Small claims court  

Superior Court  

Judicial Foreclosure  

Non-judicial foreclosure  

Disciplinary action  

Board’s Discretionary Decision Making Authority  

Corporations Code Section 7231  

Beehan v Lido Isle  

Duty to make decision  

Preparing for the Tough Decisions: To Foreclosure or not to Foreclose?  

Credibility with membership  

Limiting exposure to liability claims  

Unique needs of association  

Reality – impact of economy and real estate market  

Foreclosure: Does it Make Sense?  

Equity in property  

Financial condition of association  

Lender’s delay in foreclosing  

Property poorly maintained, abandoned or hazardous  

Liability claims from other members  

Preparing for loan  

Bankruptcy  

 Chapters 7, 11 and 13  

 Dismissal v discharge  

 Securing the debt – proof of claim  

 Scope of automatic stay  

 Obtaining relief from stay  

Post Foreclosure Considerations for Associations  

Association takes property subject to senior mortgage  

Is association obligated to pay loan, taxes, insurance, assessments, etc.?  

Is association obligated to maintain property?  

Is association obligated to store personal property of prior owner?  

Proceeding with foreclosure  

Monitor lender activity  

Monitor owner’s conduct  

Redemption period – 90 days  

Trigger foreclosure by lender  

Post Foreclosure Options  

Deed in lieu of foreclosure  

Sale of property  

Lease property  

Assessment Collections with Tenant in Possession  

Owner as landlord – common issues  

Double use of common area facilities  

Owner collecting rent  

Tenant   

Assignment of rents  

With authority in governing documents  

Without authority in governing documents   

Judgment debtor’s examination  

Rent skimming; risks to the Association  

Dealing with tenant – written lease, key terms, disclosure, handling of rent  

Working with the Bank as The New Owner  

 Bank’s failure to pay assessments  

 Bank’s failure to maintain  

Enforcement  

Enter property to maintain and repair  

Use of association vendors to maintain  

Use of local municipalities and governmental agencies  

Short Sale Considerations  

Definition of “short sale”  

Pros and cons of short sale  

Can association waive assessments, late fees, interest, or collection costs?  

Strategy - resist pressure to accept first offer and unreasonable demand to respond immediately  

What documents/information should association request from owner/agent to evaluate short sale option?  

Sales contract  

Estimated closing statement   

Agents’ commissions  

Factors influencing short sales  

Unintended consequences of short sale not taking place   

Successful short sales – protecting the association  

 Writing  

 Violations  

 Uncollected debt – how to address  

Protecting Your Association – Best Practices  

Re-evaluate collection policy  

 Consistent with governing documents and Civil Code  

 Payment plans – to adopt policy or not?  

Reevaluate collection practices  

 Uniform  

 Consistent  

 Timely  

Consider accelerating  delinquent account management?    

Send late letters sooner  

Verify accuracy of pre-lien letters and liens – if handled “in-house”  

Earlier referral of a delinquent matter to collections  

Any change in collection policy must be consistent with governing documents and Civil Code  

Regular updates to Boards of Directors