Mind Your Manners
Reminders for Conducting Annual Meetings & Addressing Collections
By Christine L. Khano, Esq.
Community Associations Institute – Georgia Chapter
Third Quarter Magazine 2021
“Brrrrrrriiiiiing!” the bells shrill to mark the start of another school year. As children pile into classrooms, homeowners file into assembly halls and clubhouses. Yes, it’s that time of year, again—the beloved association annual meeting season! Just as we prompt our children to mind their manners returning back to school, we adults may need a reminder of the same, especially when it comes to addressing the sensitive topic of collections at an association annual meeting. In a world of virtual meetings, we may have forgotten how to mind our manners. Some of us forget to don proper wardrobe below the waist, while others continue with a conversation off-screen, and more attempt to multi-task during a meeting. While important, those are not the manners on which boards of directors typically require refreshers. Instead, they request reminders on what collection topics are permissible to share at an annual meeting and which are absolutely off-limits. Whether you are a professional management company or a self-managed community, here’s a quick refresher to sweep away the cobwebs that may have built up over the summer.
Share the Collection Policy and Process
Like a teacher would encourage a child to share toys with others, this is the time for an association’s board of directors to share the collection policy and process with the community. Clear communication on the policy and process helps promote transparency, trust, and consistency within the community. I cannot count the number of times I have been contacted by homeowners who are surprised their account is in collections with a firm, and they are now being charged legal fees.
When addressing collections, the goal is to educate the community on what happens if homeowners do not take paying assessments seriously. Sharing the collection policy and process sets homeowners’ expectations, provides notice, and emphasizes the significance of having a delinquent account. It also helps the association by removing the homeowner’s argument of selective enforcement because there is a non-discriminatory and uniform policy being applied to all accounts.
The collection policy provides a snapshot of the association’s collection remedies based on the governing documents, as well as establishes due dates, interest rates, and late fees, if applicable, among other things. Meanwhile, the collection process, using the governing documents as a framework, offers the different stages a homeowner may encounter if delinquent—a pre-suit demand letter and lien, a lawsuit, and post-judgment collections, which may include a foreclosure sale, depending on the association’s governing documents.
There are two reasons now might be a good time to consult the association’s attorney before the annual meeting. First, your association may not have a collection policy in place. Second, the board may be unfamiliar with its firm’s collection process. The attorneys can help with both! Providing the collection policy and a general understanding of the collection process should incentivize the community to take paying assessments seriously.
Invite Delinquent Homeowners to Reach Out
Teachers encourage students to talk to them when the students have a problem. Let’s do the same!During the annual meeting, invite delinquent homeowners to approach the board, through proper channels, before they are turned over to collections. Let’s dig into what are proper channels and how important timing is.
First, remind the community what qualifies as proper channels. Before an account is turned over to collections, proper channels may be any or a combination of the following: calling or emailing the property manager, emailing the official board email address, and/or setting a private meeting with board members. Emphasize proper channels do not include sending a message via a board member’s personal email address or calling his/her cell phone numbers obtained through a prior social interaction.
Second, remind the community that once a delinquent account is placed with a collection firm, the only proper channel for any communication is through that collection firm. While it may seem more convenient or friendly to have a board member discuss a delinquent account in person over coffee, it creates several problems.
Board members, as an agent of the association, may unintentionally bind the association into a less favorable outcome, including absolving the debt altogether. Other less severe problems include relaying incorrect or conflicting information from what the collection firm is providing such as the amount owed or the account status. This type of misinformation creates confusion for the homeowner and undermines collection efforts. To prevent these problems and maximize collection recovery, it is critical the board both direct and defer all communications through the only proper channel—the firm. Additionally, we want the board members to remain friendly neighbors in the community. Leave the socially challenging conversations to the attorneys. My job as a collections attorney is to help associations collect debt from its delinquent homeowners. No board member wants to be the bad guy.
Respect Others and Their Accounts
My teachers constantly reminded students to respect others and their personal space. The same rule applies to adults during annual meetings. Of course, please do not touch other people without their consent, especially while Covid-19 is still a concern and socially distancing measures are still in place. More importantly, and more relevant to annual meetings, please respect your neighbors by not discussing their delinquent accounts. Do not touch the subject at an annual meeting.
The annual meeting is not the appropriate forum to discuss any specific account even if it is brought up by that particular homeowner. Board members are entrusted with homeowners’ financial records and must not share the knowledge gained from their fiduciary position. Likewise, discourage homeowners from discussing their personal accounts and raising their questions and concerns during the annual meeting. Redirect those questions to proper channels of communication.
While we load up the kids for school and we start prompting them to mind their P’s and Q’s, let’s remember to do the same. Before your next annual meeting—whether you are a professional management company or a self-managed community—remember to share the collection policy and process, invite delinquent homeowners to reach out early, and be respectful of others and their delinquent accounts. When all else fails, ask your attorneys!