In the current economy, the prompt collection of common expense assessments is essential to the functioning of any community association. Accordingly, it is crucial that the board have a policy and use it to consistently collect the fees that it assesses to its members.

For some timely tips to enable you to collect assessments in a timely manner when a member’s account becomes delinquent, click here.

Hill Wallack LLP Partners Michael S. Karpoff, Esq. and Kenneth R. Sauter, Esq. will be speaking at the 2013 Community Association Law Summit. This seminar is presented in cooperation with the New Jersey Chapter of the Community Associations Institute and the New Jersey State Bar Association’s Real Property, Trust and Estate Law Section.

Mr. Karpoff will be speaking on “Negotiating and Drafting Community Association Contracts – Getting the Terms Right,” and Mr. Sauter will be speaking on “Have We Weathered the Financial Storm? Dealing with the Fair Debt Collection Practices Act, Foreclosures, Bankruptcies, Vacancies, and the Bell Tower Case.”

The Summit will be held at the New Jersey Law Center in New Brunswick, New Jersey, on Wednesday, November 6, 2013, from 9:00 a.m. to 4:30 p.m., and it has been approved by the Board on Continuing Legal Education of the Supreme Court of New Jersey for 8.0 hours of CLE credit, of which 1.0 qualify for ethics/professionalism credit. CLE credit is also available for PA and NY, and CPE credits are also available.

For more information on this seminar or to register to attend, please click here.

Hill Wallack LLP’s Community Association Practice Group will be exhibiting at the 2013 New Jersey Cooperator’s Condo, HOA and Co-op Expo on Wednesday, May 1, 2013, 10:00 a.m. to 4:30 p.m., at the Meadowlands Exposition Center in Secaucus, New Jersey. Come say hello at Booth 435 and drop your business card for a chance to win a great prize!

Join board members, property managers, building owners and real estate professionals and meet building service companies, attend educational seminars and get your questions answered by a member of our team.

If you are involved in an insurance dispute relating to Super Storm Sandy, please ask us about reviewing your case free of charge. Contingent fees are available for Sandy representation.

For more information or to register to attend, click here!

By Ronald L. Perl, Esq.

A Federal Appeals Court has ruled that the Fair Debt Collection Practices Act (“FDCPA”), which imposes civil liability on debt collectors for certain prohibited practices, does not apply to community management companies that provide a variety of services to common interest communities. In Harris v. Liberty Community Management, Inc., the Eleventh Circuit Court of Appeals held that management companies are protected by a provision in the FDCPA that exempts individuals and entities whose collection responsibilities are “incidental to a bona fide fiduciary obligation.” This exemption would not apply to management companies whose central or primary obligation is the collection of assessments.

The homeowners association in the Harris case faced severe financial difficulties due to enormous delinquencies. In 2009, it amended its declaration to suspend water service to any home owing more than $750 in delinquent assessments. The amendment required at least three separate written notices of the intention to suspend service prior to the actual suspension. Shortly after the amendment was passed, the association’s managing agent, Liberty Community Management, Inc. (“Liberty”), sent the appropriate notices to the nineteen homeowners whose delinquent balances exceeded $750. Twelve homeowners made payment plans but seven, including Harris, had their service suspended.

Harris went to Georgia state court in an attempt to force the association to reconnect the water service but failed. She then filed suit in Federal court against Liberty alleging, among other things, that it had violated the FDCPA by sending the notices threatening to shut off the water service.  Liberty moved for summary judgment on the grounds that it was not a “debt collector” covered by that Act. It specifically cited 15 U.S.C. § 1692a(6)(F)(i), which states that the definition of “debt collector” shall not include “any person collecting or attempting to collect any debt owed or due or asserted to be owed or due another to the extent such activity (i) is incidental to a bona fide fiduciary obligation or a bona fide escrow arrangement.”

The court reviewed Liberty’s management contract in detail. It contained the usual scope of work for managing agents, including arranging for the maintenance of the common areas and facilities, negotiating contracts for utilities and insurance, preparing a budget, maintaining the books and records of the association, managing the banking relationship, and the like.  The collection of assessments was a specific duty contained in the contract. The court had no difficulty finding that Liberty owed the association a fiduciary obligation as its agent. Every function it performed, found the court, was as a fiduciary of the association.

The next question was whether the assessment collection responsibility was “incidental” to that fiduciary obligation. The court applied the dictionary definition of “incident”—something casual or of “secondary importance”—and determined that Liberty’s collection duties were incidental considering its broad scope of other responsibilities. The court said: “… Liberty did much more than just collect assessments for the Association and its homeowners; it also contracted for maintenance of the community’s common areas, obtained utilities (including gas, electricity and water), purchased insurance, investigated claims, made reports to insurance companies, kept and maintained ledgers and bank accounts, deposited money and wrote checks, reconciled monthly bank statements, and assisted the Association with its yearly tax filings.” These activities are not significantly different from those generally undertaken by full-service management companies in New Jersey and Pennsylvania. The court made it clear that the result would be different if assessment collection were management’s primary responsibility.

It is important to note that this case comes from the U.S. Eleventh Circuit Court of Appeals. Since New Jersey and Pennsylvania are within the jurisdiction of the Third Circuit Court of Appeals, this case is persuasive, but not binding. The Third Circuit could conceivably make a contrary ruling. However, the case is significant because both the District Court (trial level) and Court of Appeals ruled in favor of the managing agent on this issue.

The Eleventh Cicuit’s decision in Harris v. Liberty Community Management, Inc., decided December 19, 2012, can be found here.

For more information on this or any other issue concerning your community association, please contact one of our Community Associations attorneys. For breaking news or updates on new blog posts, follow us on Twitter at: @njcondolaw.