Update to Ledger Fee Descriptions
Required Update to Description of Pre‑Litigation Collection Fees to “Collection Costs”
Dear Management Team,
It is our opinion that fees incurred during the pre‑litigation collection process should not be labeled as “Legal/Attorney Fees” on homeowners’ account ledgers.
When a law firm is acting in the capacity of a collection agency - that is, performing collection activities before any lawsuit is filed - the work does not constitute the practice of law. Because a collection agency is not required to hold a law license, the fees generated during this stage should be described as “Collection Costs,” not “Legal or Attorney Fees.” Mislabeling these charges creates confusion for judges and may result in lower judgment amounts.
As you know, under recent CCIOA provisions, Associations may recover all Collection Costs. However, pursuant to CCIOA, “a court shall not award attorney fees to the association in an amount in excess of five thousand dollars or fifty percent of the actual costs the association incurred as a result of the failure to comply with this article 33.3 or with the declaration, bylaws, articles, or rules and regulations, whichever is less.”
Accurate classification is therefore essential to ensure better collection results, and to streamline accounting practices, we recommend the following:
Replace the “Legal/Attorney Fees” description with “Collection Costs” for all pre‑litigation collection work.
All other collection‑related invoices should be posted as “Collection Costs.”
Our office will clearly label any invoices that should be posted as “Legal Fees” therefore please ensure to review the invoices for the proper classification.
Please review this update with your accounting department to ensure that homeowner ledgers, statements, and all related communications reflect the correct terminology.
Thank you for your prompt attention to this matter. Please contact our office for any questions regarding this important matter.
Do you have additional questions about these or other legal matters? If so, we are here to help, please contact us at: info@westernlawgroup.com | 9351 Grant Street, No. 120, Thornton, CO 80229
Phone: (720) 542-8724 | Fax: 720.542.8726 | Toll Free: (844) 518-4684 | info@westernlawgroup.com | WesternLawGroup.com
THIS IS NOT LEGAL ADVICE. FOR INFORMATIONAL PURPOSES ONLY.