Assessments and Collections Flashcards

Which legal document typically establishes the association's authority to levy special assessments beyond regular monthly dues?

Answer: The CC&Rs or declaration of covenants

The CC&Rs (Covenants, Conditions, and Restrictions) or declaration of covenants is the governing document that grants the association authority to levy both regular and special assessments.

When a unit owner files for bankruptcy under Chapter 7, which portion of their unpaid assessments is most likely to be discharged?

Answer: Pre-petition assessments that are unsecured

In Chapter 7 bankruptcy, pre-petition unsecured assessment debt is typically discharged, while post-petition assessments that accrue while the owner retains the unit remain the owner's responsibility.

An association's collection policy must be provided to owners at what point to be most effective and defensible?

Answer: At the time of purchase or upon request, and posted where accessible

Best practices and many state laws require that the collection policy be provided to owners at purchase or closing and be made readily accessible so owners cannot claim ignorance of the procedures.

What is the primary purpose of a 'payment plan agreement' in community association collections?

Answer: To allow the owner to cure delinquency over time while preserving the association's lien

A payment plan agreement lets a delinquent owner repay arrears in installments while the association retains its lien rights until the debt is fully satisfied.

In most states, when must a homeowners association record a lien against a delinquent owner's property to protect its priority position?

Answer: Within the timeframe specified by state law, often before a mortgage lender forecloses

State statutes typically set deadlines for recording assessment liens; missing these windows can cause the association to lose lien priority, especially in foreclosure situations.

Which of the following is an example of an improper application of payments received from a delinquent owner?

Answer: Applying payments to attorney fees before principal assessments against the owner's wishes when restricted by state law

Many states mandate a specific payment application order (e.g., assessments before fees and costs), and ignoring that statutory order when the owner objects can expose the association to legal liability.

A condominium association's budget shows a projected shortfall mid-year. What type of assessment would the board most likely levy to cover the gap?

Answer: Special assessment

A special assessment is levied for a specific, often unforeseen expense or shortfall that cannot be covered by the current operating budget without additional owner contributions.