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  1. #1
    Join Date
    Jan 2012
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    Default Imposing a Payment Plan on Delinquent Owners

    My question involves a condominium located in the State of: Texas

    In Texas there are several new laws regarding HOAs. ( which I have included below)


    I am a board on a Single Family Home HOA.

    Due to the change in laws the management company is revising the collection policy and during discussion/review of this it was discovered that one thing they are changing is the last letter sent to homeowner which has some language to the effect of "You have 2 options. 1. Pay in Full or 2. Pay monthly the amount of $XX per month."

    They claim this is due to change in laws that without this we will not be able to do collections.

    Now how this works is that since the new law came out the Assessments get paid off first when applying a delinquent payment. However Assessments are the only thing that can be used to file for foreclosure. So the management company figures that if they send this the homeowner either pays in full or is automatically entered into a payment plan. Once the homeowner has not paid in 30 days the first payment plan payment they are in default of a payment plan therefore the HOA doesn't have to apply the payment priority to the assessments first.

    This "forced" payment plan is not mentioned in the collection policy of either the HOA or the management company. There is nothing about it in any policy only that a homeowner is allowed to enter into a payment plan and the details of that...

    I think this whole Idea is a bad circumvention of state law. I think it is unethical. And I suspect that if it really went to court we would lose the case of saying that the homeowner "entered into a payment plan" by simple virtue of them not responding to a collection letter.

    That being said, my other board members tend to look for a "professional" opinion and this is what the management company is saying we have to do so they are happy to oblige.

    The number of people this would actually effect is anywhere from 0 to maybe 5 or so at this point, but I can't see the future. That being said there isn't going to be a big uproar about this from the community for one they don't know and most don't care because they are paying.


    So am I off my rocker?
    Does this all sound perfectly legit to you?
    Is there anything I can use to show that you can't force someone to "enter into" a payment plan if they don't actively accept it?

    Another somewhat unrelated question...

    Would Late Fees / collection Fees be considered the same as "fines assessed by the association" or would they fall under "other amount owed to the association".











    § 209.009. FORECLOSURE SALE PROHIBITED IN CERTAIN
    CIRCUMSTANCES. A property owners' association may not foreclose a
    property owners' association's assessment lien if the debt securing
    the lien consists solely of:
    (1) fines assessed by the association; or
    (2) attorney's fees incurred by the association solely
    associated with fines assessed by the association.

    and

    209.0063
    Sec. 209.0063. PRIORITY OF PAYMENTS.
    (a) Except as provided by Subsection (b), a payment received by a property owners’
    association from the owner shall be applied to the owner’s debt in the following
    order of priority:
    (1) any delinquent assessment;
    (2) any current assessment;
    (3) any attorney’s fees or third party collection costs incurred by the
    association associated solely with assessments or any other charge that
    could provide the basis for foreclosure;
    (4) any attorney’s fees incurred by the association that are not subject to
    Subdivision (3);
    (5) any fines assessed by the association; and
    (6) any other amount owed to the association.
    (b) If, at the time the property owners’ association receives a payment from a
    property owner, the owner is in default under a payment plan entered into with
    the association:
    (1) the association is not required to apply the payment in the order of
    priority specified by Subsection (a); and
    (2) in applying the payment, a fine assessed by the association may not be
    given priority over any other amount owed to the association.

  2. #2
    Join Date
    Sep 2005
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    Default Re: When Can an Association Impose a Payment Plan on Delinquent Owners

    If the association includes more than fourteen lots, a payment plan must be made available.
    Quote Quoting Texas Property Code, Sec. 209.0062. Alternative Payment Schedule for Certain Assessments.
    (a) A property owners' association shall file the association's alternative payment schedule guidelines adopted under this section in the real property records of each county in which the subdivision is located.

    (b) A property owners' association composed of more than 14 lots shall adopt reasonable guidelines to establish an alternative payment schedule by which an owner may make partial payments to the property owners' association for delinquent regular or special assessments or any other amount owed to the association without accruing additional monetary penalties. For purposes of this section, monetary penalties do not include reasonable costs associated with administering the payment plan or interest.

    (c) The minimum term for a payment plan offered by a property owners' association is three months.

    (d) A property owners' association may not allow a payment plan for any amount that extends more than 18 months from the date of the owner's request for a payment plan. The association is not required to enter into a payment plan with an owner who failed to honor the terms of a previous payment plan during the two years following the owner's default under the previous payment plan.

    (e) A property owners' association's failure to file as required by this section the association's guidelines in the real property records of each county in which the subdivision is located does not prohibit a property owner from receiving an alternative payment schedule by which the owner may make partial payments to the property owners' association for delinquent regular or special assessments or any other amount owed to the association without accruing additional monetary penalties, as defined by Subsection (b).
    As I read the statute, first, the owners' association must adopt guidelines for the alternative payment schedule and second, the payments (over the three to eighteen month repayment term) must be calculated without inclusion of any "additional monetary penalties" (other than "reasonable costs associated with administering the payment plan or interest") as defined in the statute.

    If the association in your case has failed to adopt guidelines, it would not seem that they have a good argument for deeming compliance with their demand letter to constitute entry into a repayment plan. If they have adopted guidelines, in my opinion they should be more transparent about what they are doing, but I'm not going to speculate as to whether a homeowner might be able to argue that they weren't entering into a payment plan if they had notice of the proceedings that led to the adoption of the guidelines, or the guidelines themselves.

    If a homeowner ignored the letter or made whatever payments he felt like making despite the "either or" terms of the letter, he could certainly argue that no payment plan, express or implied, was entered. I would expect a court to accept such an argument from the owner. As a matter of good practice, whatever else the law might allow, if I were inviting owners to enter into repayment plans I would include a copy of a repayment agreement with the letter and have them sign and return it.

  3. #3
    Join Date
    Jan 2012
    Posts
    2

    Default Re: Imposing a Payment Plan on Delinquent Owners

    We have guidelines for payment plans and are in compliance with 209.0062

    However nothing in our payment plan policy or collection policy mention anything about mandatory or forced payment plan at any point.

    So even though the payment plan / collection policy have been discussed at public meetings and recorded there has been no open discussion or mention of this management company "loophole"

    According to the management company we could from the very first late notice say... You are late on your payment either pay in full or you are now on a payment plan of $xx per month for next 3 months.

    Then when they don't pay the next month 209.0063 basically becomes trash. So they have worked out that if they do this it is essentially like 209.0063 was never passed.


    Is there anything that says for a agreement to be "entered into" it has to be actively accepted by both parties?

    I think they are using credit card notices as justification of a forced agreement without acceptance. Similar to when a credit card company sends a notice that there is a change in conditions on the card and that unless you call and cancel you automatically accept the new agreement. My problem with this comparison is that you have the option to "cancel" the credit card and retain your current contract however you can't cancel being in an HOA.

  4. #4
    Join Date
    Sep 2005
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    Default Re: Imposing a Payment Plan on Delinquent Owners

    At risk of repeating myself, if a homeowner ignored the letter or made whatever payments he felt like making despite the "either or" terms of the letter, he could certainly argue that no payment plan, express or implied, was entered. I would expect a court to accept such an argument from the owner. As a matter of good practice, whatever else the law might allow, if I were inviting owners to enter into repayment plans I would include a copy of a repayment agreement with the letter and have them sign and return it.

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