USA Today has jumped on the media bandwagon in criticizing community associations that choose to foreclose upon default thing owners; this recent article publicizes the hardships faced by those who are in arrears on their assessments and face foreclosure from their associations; to a more limited extent it mentions the hardship of associations who face increasing number of delinquencies.
As I have repeatedly noted, unit owners who do not pay their assessments are causing great problems to associations; the dilemma is how best to respond to those problems. This article is just another example of the bad press which is associated with foreclosures; I continue to believe that collection efforts that commence with a demand letter and are followed by a personal lawsuit when necessary are a better solution to collecting past due assessments. Those who have the ability to pay their assessments will pay their assessments when faced with a demand letter and/or a lawsuit; those who cannot pay will simply face another creditor seeking to take away their residence.
The Community Association Lawyers at Hobbs & Olson recommend collecting through a formal collection policy, which should include the timely (and automatic) filing of a lien, followed by or accompanied with a demand letter, followed shortly thereafter by a complaint, if necessary. Our entire collection process from the initial demand letter through the preparation and filing of a complaint, and the opportunity for the debtor to respond, almost always progresses in less than the 90 days allowed by a notice of default. If defaulting unit owners don’t response to a demand letter, followed by a complaint, they are not going to be able to pay off following a notice of default, and the association will find itself the owner of a unit which almost certainly will be foreclosed by the lender, thereafter. And the association may or may not have marketable title, even if the lender doesn’t take the unit away.
There are occasions when the sale of a unit is warranted, such as when a lender is delaying their own foreclosure, or when they foreclose, but refuse to record their deed. In those instances, however, the Association will likely have obtained a judgment in less than the 120 days it would take to have nonjudicially foreclosed a unit, and the association can then issue a writ of execution on its judgment, reaching the same result as the nonjudicial foreclosure would have.