Collection Procedure Flashcards
Define Assessment
Charge, fee, or dues that an owner is required to pay to his Association pursuant to the Association’s dedicatory instruments or Texas law.
They go to pay:
1) Common expenses associated with the Maintenance and operation of the Association;
2) Maintenance of common areas.
They can take the following forms:
1) General Assessments;
2) Special Assessments; and
3) Individual Assessments.
What is an “Assessment Lien”
The underlying contractual lien against the Lot or Unit in favor of the POA to secure payment of Assessments.
It is a security interest in the property that secures the obligation of the unit owner to pay assessments and abide by the requirements of the Dedicatory Instruments of the Association.
The Assessment lien is contained within the Dedicatory Instruments of the Association.
If an owner fails to pay their assessments, the Association may foreclose its assessment lien.
What protections does Chapter 209 provide to owners who are delinquent in their payment of Assessments?
It imposes due process requirements on Residential Subdivisions and Townhouse regimes before they may assess a fine, file a lawsuit, foreclose an assessment lien, or seek reimbursement of attorney’s fees against an owner.
To foreclose an assessment lien on a property, what laws and requirements must you comply with?
1) Texas state law
- Chapter 209
- Chapter 82
- Texas debt collection statutes
- All statutes governing foreclosure
2) Federal law
- FDCPA
- Bankruptcy law
3) Texas constitution
4) Governing documents of Association.
What considerations should an Association give prior to foreclosing on an assessment lien?
Decisions should be made on a case by case basis, giving considerations to:
1) Amount of unpaid assessments;
2) Amount of time they have been delinquent;
3) Existence and amount of senior liens against the property
4) Whether the Association may conduct non-judicial, expedited judicial, or judicial foreclosure;
5) Cost of foreclosing the assessment lien
From where does a Residential Subdivision obtain its authority to levy assessments?
The Dedicatory Instruments of the Association.
From where does a Condominium Association obtain its authority to levy assessments?
The Dedicatory Instruments of the Association; and
Section 82.102 (Texas Uniform Condominium Act). This is applicable to all condominiums.
Define “General Assessment”
Assessments levied by an Association on a regular basis that are applied uniformly against all owners. Thy may be levied on a monthly, quarterly, bi-annual, or annual basis.
Define “Special Assessment”
Assessments that are levied uniformly against all owners within the Association on a one time basis.
Under most Declarations, before a Board of Directors may levy special assessments they must be approved by a vote of the members of the Association.
Define “Individual Assessment”
Assessments that are levied by an Association against an owner on a non-uniform basis.
Examples include:
1) Assessment levied for damage to the common areas; and
2) Assessments levied by a condominium owner for that owner’s use of water and/or electricity if the Condominium pays for all water usage and levies individual assessments for reimbursal by the individual owners based upon the usage of their Unit.
Does the levying of an assessment create a personal obligation against the owner?
For 209 Associations- Generally yes. It generally states in the governing documents that the requirement to pay assessments creates a personal obligation of the owner.
For Condos- Always. Section 82.113 (applicable to all condos) states that obligation to pay an assessment is a personal obligation of the unit owner.
This obligation is contractual in nature.
This means that if the owner ceases to own the property, that owner still has a personal obligation to pay any unpaid assessments that came due during that owner’s period of ownership.
To what counties is Chapter 204 of the Texas Property Code applicable?
Harris, Galveston, or Montgomery County.
Does Chapter 204 apply to nonprofit associations that are not incorporated?
No. They must be incorporated Associations under the Texas Nonprofit Corporation Act.
Does Chapter 204 apply to condominiums?
No. It only applies to residential subdivisions.
What powers do Chapter 204 Associations have related to assessment collection?
All powers delineated within the Dedicatory Instruments of the Association. In addition-
Pursuant to Chapter 204.010 of the Texas Property Code, they have the following powers (unless otherwise provided by its Articles, Bylaws or Declaration):
1) Collect regular or special assessments for common expenses;
2) Institute, Intervene, and defend in litigation on matters affecting the Association;
3) Impose interest, late charges, and NSF charges for late payment of assessments.
4) Charge costs to an owner’s assessment account and collect the costs in any matter provided for in the Dedicatory Instruments related to the collection of assessments.
5) Adopt and amend rules related to the collection of delinquent assessments.
What powers to Condominiums have related to assessment collection?
All powers delineated within the Dedicatory Instruments of the Association. In addition-
Pursuant to Chapter 82.102 of the Texas Property Code, they have the following powers (unless otherwise provided by the Declaration):
1) Collect assessments for common expenses from unit owners;
2) Institute, intervene, or defend itself in litigation
3) Impose interest, late charges, and NSF charges for late payment of assessments.
4) Adopt and amend rules related to the collection of delinquent assessments.
5) Suspend the voting privileges of or use of common elements by an owner delinquent for more than 30 days.
6) Impose reasonable charges for preparing and recording statements of unpaid assessments.
What powers do unincorporated Residential Subdivisions located in Harris, Galveston, or Montgomery have to collect assessments?
Only those located in their Governing Documents.
They must be incorporated as a non-profit entity in order for Chapter 204 to be applicable.
From where do Residential Subdivisions located outside of Harris, Galveston, or Montgomery counties derive their power to collect assessments?
From their Governing Documents only.
There is no statutory authority under Chapter 209 to levy or collect assessments.
From where do Residential Subdivisions located outside of Harris, Galveston, or Montgomery counties derive their power to levy interest or late fees?
From their Governing Documents only.
There is no statutory authority under Chapter 209 to levy or interest or late fees.
The Bylaws or Declaration may authorize the Association to levy late fees or interest. If those documents do not authorize the levying of late fees or interest, the Association may not assess owners for late fees or interest on past due assessments.
Must a Residential Subdivision or Townhouse regime have a Payment Plan Policy?
In most circumstantes, yes.
If the Association is less than 14 lots or less, they are not required to have such a policy.
Must Chapter 204 Associations have a Payment Plan Policy?
Yes.
What must the Payment Plan Policy allow?
It must allow the owners to pay off their delinquent regular or special assessments without accruing additional monetary penalties.
What may an Association charge an owner under a Payment Plan Policy?
Interest and administrative fees.
What is the minimum term a that PP Policy must allow?
What is the maximum term that a PP Policy must allow?
3 months minimum.
18 months maximum.
Under what cirumstances is an Association not required to allow an owner to enter into a PP under a PP Policy?
1) If the owner defaulted on a PP within the previous 2 years; and
2) Association is not required to allow an owner to enter more than one PP w/in a 12 month period..
3) If a collection notice has been sent pursuant to Section 209.0064 and the opportunity for cure has expired.
If an Association fails to adopt and record a PP policy, are they still required to allow an owner to enter into a PP pursuant to TPC 209.0062?
Yes.
Is the Priority of Payment schedule delinated in TPC 209.0063 appliciable to all residential subdivisions, including Chapter 204 Associations?
Yes.
What is is the Priority of Payment Schedule
1) Delinquent Assessments;
2) Current Assessments;
3) Attorney’s fees and 3rd party collection costs related to the collection of delinquent Assessments or any other charge that could be the basis for foreclosure;
4) Attorney’s fees related to matters that could not be the basis for foreclosure;
5) Fines.
6) Any other amount.
What is the exception to the Priority of Payment Schedule under TPC 209.0063?
1) If at the time of the payment the owner is in default under a payment plan, the the Association may apply the payment in any manner. However-
2) The Association must apply the payment to fines last.
Is there statutory authority to collect costs of assessment collection for a Chapter 204 Association under Chapter 204?
Yes.
Section 204.010 of the Texas Property Code allows Residential Subdivisions within Harris, Galveston, and Montgomery Counties to-
1) Collect regular or special assessments for common expenses;
2) Institute, Intervene, and defend in litigation on matters affecting the Association;
3) Impose interest, late charges, and NSF charges for late payment of assessments.
4) Charge costs to an owner’s assessment account and collect the costs in any matter provided for in the Dedicatory Instruments related to the collection of assessments.
5) Adopt and amend rules related to the collection of delinquent assessments.
Is there statutory authority to collect the costs of recovery of delinquent assessments under Chapter 209?
No.
In order to assess a delinquent lot owner for costs of collection that Association must look to Chapter 5.006 of the Texas Property Code or its Dedicatory Instruments.
