Delinquent Homeowner Checks: What to Look For
When an Owner becomes delinquent, and the file is transferred to the attorney for collections, the Owner should begin sending their checks to the law firm for processing. The Owner is advised in writing that the checks are to be mailed to the law firm and not the management company. However, many Owners will still send their checks to the management company, which can cause issues for the HOA if the check is not first closely inspected to ensure that it can be deposited. The following are recommendations on what to look for on a delinquent Owner’s check before it is deposited:
Restrictive Endorsement – Is there a note on the memo line/check stub of the check or an enclosed note/letter from the Owner? Some Owners will try to write items on the memo line/check stub of the check or include an enclosed note/letter, and depositing that check as written will legally bind the HOA to what the memo line/check stub or note/letter states. Therefore, if an Owner writes “payment in full” on the memo line/check stub or note/letter and the check is not for the full balance, but it is deposited, the HOA will lose its rights to try to collect the rest of the balance.
One Check for Multiple Units and/or Associations – At times, an Owner may own multiple units in one Association or multiple units in different Associations, all managed by the same management company. It is not unusual for such Owners to send in one check to cover their multiple accounts. It is imperative that the check is carefully processed & split between the accounts in the correct amounts. As an example, if the check is processed only against one account, that account will have a large credit, and the others will become delinquent, causing future liability issues for the Association and/or management company. If a note/letter is included with the payment, please ensure to forward it to the attorney’s office and retain it in the Association’s records.
Bill Pay Issues – When Owners have their bank issue a check, they believe that issuance of the check means that a payment was already sent & received, which unfortunately is not the case in many instances. It should be noted that an issued check means just that it was issued. It does not mean that the HOA accepted it, or that it was even delivered and negotiated. We recommend advising Owners via newsletters or other communication that checks issued via Bill Pay need to be confirmed as negotiated from an Owner’s account in order for it to be a valid payment, not just issued. The process for accepting a Bill Pay check from a delinquent Owner needs to be the same as stated above.
In conclusion, all received for delinquent Owners who have active files with the attorney should first be sent over to the attorney’s office. The check can be scanned & emailed to the attorney’s office and deposited only when advised that it is OK to do so by the attorney’s office.
Do you have questions about this article or any other HOA question?
Contact us at: info@westernlawgroup.com
THIS IS NOT LEGAL ADVICE. FOR INFORMATIONAL PURPOSES ONLY.
9351 Grant Street, #120, Thornton, CO 80229 ∙ Phone: (720) 542-8724 ∙ Fax: 720.542.8726