Condo Media - July 2018 - 34

AVOIDING
FORECLOSURE:

Collection Alternatives
for Boards

oreclosure and forbearance
through a payment plan (discussed at length in the lead article
on page 26) aren't the only tools
in an association's collection arsenal. There are other strategies for pursuing delinquent owners and collecting the
money they owe.
One option is to suspend their
privileges (the right to vote in elections
and to serve on the association board)
and/or bar their access to community
amenities. This won't have much impact
on folks who are unable to make their
payments (and it will have no impact
at all in communities that don't have
any amenities), but it may encourage
chronic late-payers, who are simply
forgetful, disorganized or annoying - to
pay on time. For large associations with
swimming pools, tennis courts and other amenities, removing them "can be
significant," Bruce McGlauflin, a partner
in the Maine law firm Petruccelli, Martin
& Haddow, LLP, notes.
Appellate courts have recognized
withholding ownership benefits as "a
valid remedy" in many states, but not
in Massachusetts, Thomas Moriarty, a
principal in Moriarty Troyer & Malloy LLC,
says. But if an association's governing
documents authorize the remedy, he
believes, "it is unassailable," even without
that judicial blessing. And for purposes of
collecting special assessments and fines,
which aren't covered by the priority, he
suggests, this strategy is worth considering. For common area fees, however,
"the tools linked to the priority lien are so
powerful," Moriarty believes, "associations probably don't need anything more
complicated."
The Maine condominium act specifically allows associations to suspend member
privileges "as long as it doesn't pose risks

CONDOMEDIA July 2018

to health or safety or damage property,"
McGlauflin says. Although associations
can rely on this statutory authority alone,
he advises boards to include authorizing
language in their documents as well, if for
no other reason than to put owners on
notice of the penalty.
The New Hampshire condominium
statute also has a "termination of
services" remedy, but, unlike the Maine
provision, "it isn't automatic," Gary
Daddario, a partner in Winer & Bennett,
LLP, points out. The authority has to be
specified in the association's governing documents. "If the association's
documents don't include this language,
owners should amend their documents
to add it," he advises.
The New Hampshire courts have
defined association services broadly,
upholding the right of an association to
block the driveway of a delinquent owner.
"The owner said, 'this is crazy,'" Daddario
notes. "But the New Hampshire Supreme
Court said parking was a service provided
by the association that it had the authority
to withhold."
AUTHORIZED BUT UNWISE
Unlike the Maine statute, the New
Hampshire condominium law does not
prohibit withholding of services that
threaten health or safety. That means
that boards, at least theoretically, could
terminate "any service provided by
the association," including water and
electricity if those are common area services, Daddario observes. "And there
is no question that cutting off water or
heat would get an owner's attention,"
he agrees.
But that doesn't mean it's a good
idea. Withholding these services could
create "an unsanitary condition" in the
unit or otherwise threaten the health of

residents. Although the statute "lets you
do anything," Daddario notes, public
health officials in many communities will
side with the owners, and associations
engaged in a public battle of that kind
"could end up with even bigger problems" than the delinquent payments they
are trying to collect.
Among the obvious concerns: The
association might incur legal liability
for illness, injury, or damage to the unit
resulting from the shut-off of water
or power. And even if the association
ducks that liability risk, the public relations damage will be immense. Press
reports about a family shivering in a
cold, waterless apartment on Christmas
Eve would fill the local papers and
probably end up on national television
news, damaging the image of the community and almost certainly affecting its
property value as well.
SOME OTHER IDEAS
Other less fraught collection strategies
boards might consider:
n Get the mortgage lender involved.
"This works sometimes," Moriarty
says, especially where the association
has a priority lien and the lender risks
suffering a total loss on the mortgage.
The Massachusetts statute allows lenders to avoid the priority lien by entering into an agreement to pay off the
portion of the delinquency covered by
the priority when receiving notice of it
and agreeing to keep the owner's payments current going forward, until the
lender forecloses.
n Go to small claims court. This route can
avoid a foreclosure, but it has limited
utility and several disadvantages. The
limited utility results because "small

Condo Media - July 2018

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