Learn more about our management packages today —
Call toll free (888) 565-1226

To Foreclose or Not to Foreclose

Should a homeowner association use foreclosure to collect association dues?

Steve BlackThe power to foreclose for unpaid association dues is a significant option in North Carolina. In many cases it is difficult for association boards and memberships to support using foreclosure without better understanding the importance of associations collecting all funds budgeted.

It is important to keep in mind that an overwhelming number of foreclosure actions are dismissed very early in the process because the homeowner pays in full in a lump sum or through a payment plan. Only a small fraction of cases are actually foreclosed.

Associations, in almost all cases, are non-profit corporations with no financial cushion, profit, or extra funds available. When members don’t pay the association will be unable to meet an obligation. There is no wiggle room. The point can be made with the simplest of associations like Happy Acres, a 50 home neighborhood with an entrance sign and a retention pond.

Happy Acres should have insurance on any common area, entrance sign, and upon the board of directors. Will anyone argue against that? The Association must file Federal and State tax returns every year. No argument there either. Equally important, the retention pond is monitored by the State and will inevitably need dredging and eventual reconstruction. All of these obligations are critical and all of them require money.

The most common association obligation to suffer when dues are not collected is landscaping. This results in an instant, noticeable, and appreciable decline in standards, aesthetics and value in the community.

Feel free to add whatever amenities you would like to this analysis and the answer remains the same. With a non-profit association strong tools are needed to encourage homeowners to pay their share of the common expenses so that obligations can be met.

Why not use small claims court instead of foreclosure? In very short summary, experience has shown that seeking a judgment in small claims court does not make the payment of dues a priority for the homeowner. The Association ends up spending the same amount of time and money pursuing the unpaid dues in small claims court but with far fewer positive results for the Association and its membership than foreclosure.

Author: Steven E. Black
Articles have been Reprinted with permission from Black, Slaughter, Black.

* These articles and related content on this website are provided without warranty of any kind and in no way constitute or provide legal advice. You are advised to contact an attorney specializing in Association Management for legal advice related to your specific issue and community. Some articles are provided by thrid parties and online services. Display of these articles does in no way endorse the products or services of Community Association Management by the author(s).