Superhero or Supervillain?
Is Your Association’s Declaration Fighting for Your Community or Against It?
By Christine L. Khano, Esq.
Community Associations Institute – Georgia Chapter
Second Quarter Magazine 2022
A deep, gravelly voice blares through an old television set, “Citizens of Georgia, do you know what your association’s declaration is doing in the quiet of the night? It may be the superhero you wish for loaded with a host of collection powers ready to save your community’s floundering financial reserves. Alternatively, it may be the supervillain you dread attempting to foil collection attempts against those pesky delinquent owners. Only a closer look will tell. Stay tuned tonight with channel eight’s favorite community association news team, Diane and Bob!”
“Diane here, and thanks for joining us tonight,” chirps a melodic voice. “Bob is out in the field and bringing us the latest community association news. How is it looking out there, Bob?”
“Good evening, Diane! We have a board of directors attempting to battle a throng of delinquent owners and their growing mountain of assessments. I don’t know if the board can overcome the mounting balances!” Bob exclaims. As the board of directors stand to fight, a looming mysterious figure approaches the throng of delinquent owners. “Oh, wait, what’s this?” Bob asks. “Diane, we have the community’s declaration surfacing to join the fight, but whose side is it on? Does it have the provisions the board needs to accomplish its collection goals?” Bob muses aloud.
Diane chimes, “I wouldn’t discount the board just yet! Bob, do I see an acceleration of assessment provision in that declaration? If so, I believe that means the board can accelerate and demand any remaining, unpaid installments of that assessment or charge if it is not paid in full within a set number of days.”
“Yes,” Bob states enthusiastically, “that’s right! And look! The declaration looks like it’s breaking out not just any old attorney fee provision but an enhanced one. It specifies the ability to collect all reasonable attorney’s fees actually incurred, including post-judgment attorney’s fees, expenses, and costs! Wow, you don’t see one of those every day. That would help any collection fight. Too many associations lose money having to cover those post-judgment collection costs without such comprehensive language.”
Off screen a voice screams, “You can’t catch me! I don’t own the property anymore! I don’t owe you anything!”
“Diane, I think we have some delinquent owners trying to escape liability and quietly transferring ownership without paying their balances,” Bob said indignantly. “How can they get away with that?”
“Not to worry,” Diane says confidently, “I see the declaration demonstrating another collection power. I think it’s grantor-grantee liability.”
“Grantor-grantee liability? I’m not familiar with that one,” Bob remarks.
“Yes, with grantor-grantee liability power each owner and his or her subsequent owner are jointly and severally liable for all assessments and charges due at the time of transfer of the property. That means the board can keep both prior and current owner on the hook for the balance owed when the property changed hands. The prior owner hasn’t escaped collections, yet,” Diane states smugly.
“That’s great!” Bob admits, “But I worry. I see some delinquent owners leaving and renting their properties out. How is this board going to collect those unpaid balances?”
“Bob, do you see the declaration holding a rent assignment provision by chance?” Diane asks. “If the declaration has it, this board is set! The board would be able to demand monthly payments from the tenant, in the amount of his or her rent, to be applied towards the delinquent owner’s balance during the period of the lease. The board could pursue the tenant for money owed by the owner.”
“Why, yes! I see the rent assignment provision tucked under the ‘Liability for Assessment’ leasing provision! This collection battle is looking better and better.”
“I agree, but you know what would seal the deal for this board? If this declaration was armed with some strong foreclosure rights,” suggests Diane.
Bob smiles. “You said it, Diane! Most declarations provide boards with the right to initiate a lawsuit against the owner to collect outstanding balances, but not all empower their boards to foreclose on their liens without first paying off superior liens or encumbrances like mortgages or tax liens, too. Such foreclosure rights are reserved for associations submitted to the Georgia Property Owners’ Association Act (POAA) or the Georgia Condominium Act.”
“It’s good to be one of those associations! They usually also have declarations loaded with the full gamut of suspension rights like suspension of voting and membership rights, use of common property, and even utility and services provided by the association. The ability to leverage suspension really yields collection results!” noted Diane.
“I couldn’t agree with you more, and I think this association was one of the lucky ones with a superhero declaration fighting to empower the board. It was packed with all the necessary collection powers to assist in whittling down that mountain of delinquent balances and replenish the association’s financial reserves.”
“But, Bob, what about all those helpless associations who are left with supervillain declarations that stayed silent, lurking in the night?”
“There’s hope for those, too! They can always transform with help from their community association attorneys and submit to the POAA to enhance its collection abilities and other powers. More on that topic tomorrow, Diane. Good night, Georgia!”