Association boards frequently ask what recourse they have against owners who fall behind on paying assessments, or violate other provisions of an association’s governing documents. While most associations’ governing documents provide for the right to fine owners and place a lien on their property, not all boards are aware that they may also suspend owners’ rights to use common elements or facilities.
This question comes up a lot from our association clients, who are often unsure about how to proceed, for fear of violating the automatic stay. Many associations know they should refrain from seeking collection efforts against homeowners for outstanding pre-petition assessments, but what about post-petition assessments? Further, can the association attempt to recoup pre-petition assessments without violating the automatic stay?
Case Study – Montalvo
A recent decision in In re Federico Augusto Montalvo, 546 B.R. 880 (M.D. Fla. 2016) addressed these issues. The owner of two condominium units filed Chapter 13 bankruptcy and specified in his Chapter 13 Plan that he was surrendering his interest in the units, although he held title to units during the pendency of the bankruptcy case.
Often the 6 o’clock news highlights the plight of a homeowner fighting his or her homeowners’ association (HOA) because the association is enforcing a rule that the owner doesn’t like and claims to have been unaware existed. The rule was probably there all along had the homeowner read their association documents. Also in the course of everyday conversations in this economy, homeowners who have fallen behind on their assessments are asking, “Can my condo/homeowners’ association really evict me for just a few thousand dollars I owe?” Following are answers to five common questions owners ask, often when it’s too late, about purchasing and living in a community association:
1. Can my association really “evict” me for unpaid assessments?
Yes, although it is not an eviction, but a foreclosure. In Florida, condominium associations, by law, and HOAs, if provided in their recorded documents, do have a lien to secure the payment of assessments, late fees, interest and attorneys’ fees and costs of collection.