Owner Delinquencies & Collecting Rent from Tenants

I want to thank everyone that attended the webinar today and especially thank both Scott Peterson and guest Seth Heller for their insight regarding this hot-button issue. We will post a link to the recorded webinar when it is available and address some of the most frequently asked questions here on this site.

We emphasized the differences between demanding rent pursuant to the 2010 legislative changes before filing a lawsuit and collecting rent after asking the court to appoint a rent-receiver for occupied units when the owner hasn’t paid assessments. The majority of questions raised included the following issues:

Fair Debt Collection – How much do we ask for and how can we demand that amount without revealing the debt to a third-party tenant?

The answer – you don’t ask for a specific amount unless you only ask the tenant to pay the amount of the monthly (or quarterly) assessments as they are due. You simply demand the tenant to pay future monetary obligations to the association and if there is an overpayment you remit that sum back to the owner. Once the account is paid in full, the association should advise the tenant to split the rent payment – paying the association the amount necessary to keep the unit current and remitting the balance to the landlord owner.

Reaction to Demands – Seth explained that in his experience sending a demand for rent before the court order is in effect produced the following responses:

•One-third of the tenants paid without objection;
•One-third of the tenants move out and abandon the property (to avoid becoming involved in legal action or otherwise); and
•One-third of the tenants refuse to pay (sometimes because the landlord threatened eviction and sometimes because they don’t feel any obligation to the association).
Scott and I then addressed what I thought was even more typical – a total lack of response from either the owner or the tenant. They both simply ignore the association’s demand. There are plenty of options how to proceed if the tenant refuses to pay (or ignores the demand) and this is one area where there are major distinctions in the process depending upon whether the court appointed a rent-receiver.

If there is a court appointed rent-receiver, the receiver can begin the eviction process against the tenant (which is not usually cost effective) or require the tenant to appear before the court as a result of an Order to Show Cause (which is very effective). The association also has the power to evict a tenant that does not comply with the demand, even if the tenant paid rent to the landlord owner. Again, that is usually not the most cost-effective way to proceed. The association still has the power of lien foreclosure. It also now has the power to suspend use rights. Its surprising how many tenants change their mind about diverting rent payments to the association once gate clicker privileges or use of the recreation facilities are suspended. (Don’t forget to consult with counsel regarding the suspension procedures.)

We’ll include some tips how to determine whether the occupant is a tenant and what to do if the owner claims that the occupant is a brother, cousin, friend or non-paying guest in the near future as well as address some of the questions we didn’t have time for today. In the meantime, please read the following posts for answers to questions about handling slow mortgage foreclosures:

Bank Sanctioned for Delaying Foreclosure – Lender and Law Firm Both Held Liable

Association’s Options to Push Bank Foreclosures Are Still Viable Despite Tadmore & Coral Key

Associations Facing Mortgage Foreclosures Head On

The Association’s Decision to Foreclose

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