As we near the half point of 2022, it’s a good time to review some post-COVID lien enforcement issues.
• First is the timing change for issuance of Notice of Lien letters to delinquent owners. Last November, the Federal Consumer Financial Protection Bureau made some changes to the Fair Debt Collections Practices Act (“FDCPA”) that affect lien enforcement.
Late fees were suspended by most condominiums during the pandemic, and some continue to do so, but I receive many calls from boards and managers wondering if they can reinstate the late fees. Of course you can, but know your constituency.
The Notice of Lien letter is the initial communication condominium counsel send to the unit owner advising that they are more than sixty days past due on payment of the common expenses assessed to their unit. Previously, the unit owner was provided a period of thirty (30) days from the date of receipt of the letter to pay the past due amounts and if no response were received, the condominium trust could proceed with the next step in the lien enforcement action. It was accepted that first class mail could be presumed to be received within three days of the date of mailing. The last few years have seen changes in the postal system, with employee cutbacks and many communities eliminating mail service on weekends. The FDCPA Rule change states that receipt can now be assumed to have been received within five (5) days of mailing and now specifically excludes Saturdays and Sundays and all federal and state holidays from calculating the thirty day response period. Providing a five day receipt assumption along with the exclusion of Saturdays and Sundays, effectively gives consumers forty-five (45) days in which to respond or make payment before the lien enforcement action may continue. Consequently, condominium trusts should not wait longer than ninety (90) days before sending a delinquent account to counsel. To wait longer could potentially result in the loss of priority of several months of condominium fees.
• Condominium trust notices to delinquent unit owners. The most common complaint heard from unit owners after they receive the initial Notice of Lien letter from our office is that there was no prior notice provided by either the condominium trust or the management office that their account was in danger of being sent to legal counsel. The condominium trust and/or its management company should first send its own letter directly to the unit owner to advise them of the arrearages and see if a response can be generated – either by a payment or a conversation with the unit owner as to what their present situation is. This is the ideal time for the parties to enter into a repayment agreement if possible.
• During COVID many unit owners moved around a bit – either being stuck somewhere else during quarantine or seeking employment elsewhere and thus mailing addresses may have changed. While most condominiums try to lower mailing costs by sending notices, newsletters and condominium updates via e-mail, lien enforcement remains rooted in the 20th century and it is statutorily required to send the Notice of Lien letter via certified and first class mail to the unit owner’s actual mailing address, so make sure to update unit owner address information and provide same to condominium counsel.
• Late fees were suspended by most condominiums during the pandemic, and some continue to do so, but I receive many calls from boards and managers wondering if they can reinstate the late fees. Of course you can, but know your constituency – does your condominium continue to have multiple unit owners struggling to get back on their feet economically post-COVID? If so, you may want to delay. If you do decide to reinstate late fees, first advise all unit owners by whatever means of communication your condominium uses, that late fees will be reinstated by a certain date, the amount of the late fee and what day of the month it will be assessed if payment is not received. This communication is also a good way to remind unit owners to sign up for ACH payments to avoid late fees and that should their account become more than sixty (60) days delinquent that the account will be turned over to legal counsel for a lien enforcement action for which unit owners are liable for the attorney’s fees. Provide at least a thirty (30) day warning of reinstatement – for example, notification sent in May will advise that late fees will be reinstated with the July payment. Sufficient notice of late fee reinstatement will hopefully result in unit owners curing continuing balances and will stop any future arguments that they were unaware of such a policy.
• Finally, as all mortgage foreclosure moratoriums have ended, bank foreclosures are on the rise once again. During COVID condominium trusts may have forgone recording trustee certificates after elections. Banks are statutorily required to send notice of foreclosure sales to all parties of record, and even if no complaint for non-payment of condominium fees has been filed and recorded, the bank is still obligated to send notice to the condominium trust as a junior creditor. Are your trustee certificates up to date and recorded? Do they contain information as to the trust’s mailing address or property management company’s address so that the bank has an address to send notice to? Having the condominium trust information updated and recorded provides the condominium with an argument for payment should a foreclosing bank fail to send the statutorily required notice of sale. Should a bank notice of sale be received, immediately notify your legal counsel to determine whether any lien enforcement action needs to be taken.