On Collection Costs
by Candice J. Gundel, Esq.
Are collection costs incurred by an Association pursing delinquent assessments a charge that can be recovered from the delinquent owner? Yes.
Often times an association incurs collection costs prior to or at the time a delinquent account is referred for collection. These costs may be incurred by associations engaged in self-management or as part of an association’s contract with its management company and often include sending late notices, a statutory pre-lien notice, as well as preparing and sending the delinquent account to the association’s collection professional. These are actual costs incurred by the association and should be included in any collection efforts made on behalf of the association, including but not limited to a claim of lien, lien foreclosure, personal judgment, etc.
The recovery of collection costs is included within the purview of Florida Statute, Chapters 718, 719, and 720, encompassing condominiums, cooperatives, and homeowners associations across Florida. The different chapters utilize essentially the same language; for demonstrative purposes I will include the condominium language from Florida Statute, Chapter 718.
Section 718.116(5)(b), Florida Statute, provides that a claim of lien secures the amounts due and owing to the association, specifically, the “reasonable costs incurred by the association incident to the collection process” Further, Florida Statutes, section 718.116(3), states that when a payment is received on a delinquent account the payment must be applied to the interest, late fees, costs incurred in collection, attorney fees, and then to the delinquent assessments. These provisions together specifically allow the association to charge and collect the costs incurred in collection. Notably, these costs are not limited to costs incurred by legal counsel, but instead encompass all costs incurred in pursuing the collection of the delinquent amounts owed to the association. As such the association should be charging the subject property owner for the hard costs incurred either in self-management or from its management company for pursuing any collection of amounts due to the association.
Although these collection costs are a valid charge to a delinquent property owner’s account, the association should be mindful that not all accounts will be collected in full. A variety of factors, such as your associations governing documents, bankruptcy, mortgage foreclosure, short sales, etc. may affect the association’s ability to collect the costs incurred. If you have a question about the collections of a specific charge or account you should consult your management and/or legal counsel.
Business Law Group strives to collect the maximum amount for our association clients under each community’s relevant governing documents and Florida Statutes, including the collections costs incurred prior to the delinquent account being referred to our office. Community associations should not have to incur unnecessary write-offs, fees or costs in pursuing the collection of delinquent amounts from property owners, these amounts are recoverable.