– By James R. McCormick, Jr., Esq. (originally published in April 1999)
A reasonable assessment collections policy is an important tool for boards of directors to utilize in fulfilling the financial obligations of their association. However, many associations still maintain an inefficient system by requiring the full board to make routine decisions and grant routine authorizations. Such tasks are better suited to one board member or a committee of members (an “assessment collections committee”) which is able to meet on an ad hoc basis. If the board is concerned about too hastily subordinating deliberation to efficiency, it may wisely elect to establish certain guidelines for this committee to follow. Any decision that falls outside these parameters can then be left to the board’s consideration.
To illustrate the importance of this change, consider for a moment a hypothetical lawsuit filed for recovery of past-due assessments on behalf of an association client. The homeowners, having been served with the Summons and Complaint, respond with a generous offer to pay 75% of the amount due in a lump-sum payment. Unfortunately, the board meets quarterly Ñ two months from now. Although the board finally accepts the offer, its untimeliness results in costly legal delays and an unnecessary delay in the association receiving its money.
Now, let us assume the same board ultimately rejects the offer. It then faces the unwelcome task of countering an eight-week old proposal, which may no longer be “on the table.” If the association must resort to filing a lawsuit in the first place, it is likely that the debtors are in dire financial circumstances. Often, there is only a short window of time in which to accept an offer. Debtors’ bank accounts may be even thinner if the Board waits to accept their offer. Worst of all, with other debts mounting against the debtors, they are more likely to declare bankruptcy.
The nature of settlement negotiations requires accurate information and timely responses. By dragging matters out over weeks and months, boards can seriously complicate the process and reduce the chances of a desirable result. By following the suggestions outlined above, on the other hand, boards can achieve a significant streamlining of its assessment collection policy.