Month: August 2015

Should an Association Publish the Names of Assessment Delinquents?

We have all heard the expression “that wheel won’t turn without any grease!” And every member of a Board of Directors of a community association knows that their Association cannot run without the regular and timely payment of assessments. Generally, a community’s Declaration will provide for either a statutory lien for unpaid assessments (for condominiums or homeowners associations subject to the Georgia Property Owners’ Association Act) or lien rights. Declarations also generally allow the association to collect, as part of its lien, interest, late fees, and costs of collection. But as most of us have discovered, collecting assessments through traditional legal channels is expensive and time consuming. Some condominiums are permitted to suspend certain utilities as a remedy for non-payment of assessments, but only after they have obtained a judgment. Many associations are also authorized by their Declaration or Bylaws to suspend an owner’s rights to use the amenities if they are delinquent in the payment of their assessments. Alice Richardson is president of Community Club Management, Inc. which specializes in managing single family communities with extensive amenities. She told me: “I am continually amazed by the number of people who will come to my office with cash in hand for the total amount due, not questioning late fees or interest, the week before the pool passes are issued.”

In addition to these remedies, which are contemplated by a community association’s Declaration, it seems like every Board, frustrated by assessment collection, sooner or later asks its management company or attorney if they can publish a list of the names of owners who are delinquent in the Association’s newsletter, post it at the mailboxes, or display it at the entrance of the community. In Colonial America people were put in stocks, subjected to public dunkings or forced to wear clothing emblazoned with letters reflecting their transgressions. Why not public shaming as a method of debt collection?

The position taken generally by community association professionals is that there is too much potential exposure for liability for the management company and/or the Board in publishing names of delinquents. In Georgia, libel is “a false and malicious defamation of another, expressed in print, writing, pictures, or signs, tending to injury the reputation of the person and exposing him to public hatred, contempt, or ridicule.” (O.C.G.A. Section 51-5-1.) Some Boards have been reluctant to publish names because there is the possibility that the records of the Association may not be current and that upon publication, the list may not be correct. Management companies, which provide the account information, are likewise reticent to certify lists of delinquents to a newsletter committee who may not get the newsletter out for several days or weeks, during which time some homeowners might pay. To publish the name of a person as delinquent if they were in fact current with their payments would almost certainly give rise to lawsuit. Similarly, only the record title owner of a property is generally liable for payment of assessments. Without performing a title examination, it is impossible to know who the record title owner is. Many times we have discovered, prior to filing suit, that the residents, who everyone always assumed were the owners are not. Very often only one spouse is on title to the property.

If the Association’s records are correct and current, a lawsuit for libel arising from the publication of names of delinquents would probably not be successful. The following summarizes the most current statement of the law in this area: “As respects a charge of failure to pay debts, without any imputation of insolvency, it seems to be settled that a writing containing the mere statement that a person who is not a trader or merchant, or engaged in any vocation wherein credit is necessary for the proper and effectual conduct of his business owes a debt and refuses to pay, or owes a debt which is long past due is not libelous per se and does not render the author or publisher of such statement liable without proof of special damages [Cit.]” Sumner v. First Union Nat’l. Bank &c., 200 Ga. App. 729, 409 S.E2d 212 (1991); Estes v. Sterchi Bros. Stores, 50 Ga. App. 618, 179 S.E. 222 (1935).

However, even if an Association is entirely sure that the account information is correct, it may only mean that the Association could successfully defend a lawsuit for libel, not prevent such a lawsuit from being filed. Some of the possible claims plaintiffs would assert against the management company, the Board collectively, and perhaps its members individually, would be injury to reputation, slander of credit, injury to credit and financial standing in the community, defamation and intentional infliction of emotional distress, and seek damages therefor. Because libel is an intentional tort, it is possible that an Association’s Errors and Omissions insurance policy would either provide a defense for the Association under a reservation of rights or perhaps decline coverage altogether. In that case the Association would have to underwrite the costs involved in the defense of the case.

We will come back to the legal issues in a moment, but first let us look at this issue from a pragmatic point of view. Will it work?

People do not pay their assessments for a variety of reasons, these categories are not exhaustive. First, to be blunt, some homeowners are broke and cannot pay their assessments. No one chooses this condition. Some people find themselves financially over-extended as the result of some family tragedy, inflated gas bills, illness or even death. Some arrive there due to poor planning, others by no planning at all, and some by misfortune. But bottom line, no one is thrilled to be broke and if they had the money, they would happily pay their assessments. Publishing the names of people in this category will definitely embarrass them, but it will not translate into money. You have made someone even more miserable than they were before, but not accomplished the objective of collecting the assessments. Second, this is a group of uninvolved or disaffected homeowners. These are the people who claim they never heard there was a homeowners association, have never used and will never use the pool, and do not know any of their neighbors. They will never know if their names are published in the newsletter and could care less. Again, the objective of collecting assessments has not been achieved. Third, this is a troublesome group of people who do not pay bills as a lifestyle. These are perhaps the most annoying delinquents. They generally have nice cars and homes and have jobs. To them, payment of debt is a game. If you want their money, you have to find it and get it. If you read their credit reports, it is astounding that they qualified for a mortgage at all. These people will not pay assessments, will not respond to warning letters from attorneys and generally do not even respond to lawsuits. They simply wait to have a garnishment filed against their bank account or employer. Amazingly, they sometimes do not even call when that happens. These people are callous to the entire collection process. They do not care at all if you publish their names. The fourth group of people have simply made a clerical error and overlooked payment. These people will tell you, “My wife pays the household bills and I pay the mortgage, I guess this fell through the cracks.” As soon as they learn of the oversight they pay. Publishing their names will get you the money but could alienate them in the future. Finally, you have people who are experiencing a temporary financial or personal setback which may have resulted in failing to pay on time. These are loyal and good association members who have paid their assessments every year on time, but this year did not. Do you want to publish their names without asking what the problem is, or seeing if there is anything that you, as a neighbor, can do to lighten their load? With this group you may collect your assessment as a result of publishing their names, but what did it cost you as a community?

While there are no guarantees, I believe an Association could successfully defend itself in a lawsuit arising from the publication of a list of the delinquent owners, as long as the information regarding amount due and the correct owner is current and correct. However, is a Board acting in an Association’s best interests in pursuing a policy which may well subject it to a lawsuit unnecessarily? Will enough money be collected to justify adopting such a policy? Is this a practice which reflects how we treat our neighbors, and how we would want to be treated, in this community? These are just some of the questions a Board should consider before adopting a publication policy.

As a retired Magistrate Court Judge (DeKalb County), I was happy to be asked to write an article about the “Pros and Cons” of filing collection cases in Magistrate Court! A little background on Magistrate Courts in general: The first Magistrate Court was created in Georgia in 1961 as a “small claims court” intended for citizens to settle their disputes without attorneys. More than 100 of these courts were created throughout the state over the next few decades, each with its own local rules and jurisdictional limits. The resulting confusion was resolved with the passage of the “new” 1983 Constitution of the State of Georgia which created discrete levels of Courts, including a Magistrate Court with a set of Uniform Rules governing all Magistrate Courts throughout the State. Initially, the jurisdictional limit for civil matters was $2,500, but this has been raised twice and now is $15,000.¹ Of course any lawsuit seeking relief other than a money judgment, such as a covenant enforcement action seeking equitable relief could not be filed in Magistrate Court.

There are some very good reasons to file an assessment collection case in Magistrate Court, and some other good reasons to choose a different forum. There are four principal reasons to file suits in Magistrate Court:

1. Lower filing fees. For example, in DeKalb County, it costs $51.50 to file a civil action in Magistrate Court (plus $35 per defendant for service). In State Court, the filing fee is $217.50 (plus the same $35 per defendant for service). Keep in mind, however that a when judgment is awarded to the Association, the filing fees are included in the award regardless of what court an action is filed in.
2. Speed of adjudication. If a defendant files an Answer to a lawsuit in Magistrate Court, it will be placed on a calendar between 15 and 40 days after the Answer is filed.
3. Self-Representation. Because Magistrate Court is not a Court of Record, a member of the Board of Directors, or even in some circumstances a property manager, can represent the Association.
4. A Judgment is a Judgment. If no appeal is filed, a judgment entered by a Magistrate Court is just as collectible (or uncollectible!) as one entered by any other Court and remains valid for seven years, just as any other judgment.

There are, as you can imagine, a number of reasons why filing in Magistrate Court may not be the best choice. Here are a few matters to consider:

1. De Novo “appeals.” Any decision rendered by a Magistrate Court can be ‘appealed’ by the losing party to either State or Superior Court, not for a review of anything that transpired at the Magistrate Court trial, but for a brand new trial on the merits. This means trying the case all over again. If you have an attorney, it means additional trial and preparation time. If you did not have an attorney representing the Association at the Magistrate Court trial, you will have to hire one now because Associations, as corporations, cannot represent themselves in State or Superior Court.
2. Pro-Se Friendly Tribunal. Magistrate Court is intended to allow citizens to ‘have their day in court’ and Magistrate Court Judges are trained to give great latitude to parties representing themselves. A defendant will be allowed to testify about all of their ‘issues’ with the Association. Attorneys who object to such ‘evidence’ are generally told to hold their objections, be patient, and let the Judge sort it out. This is very frustrating to attorneys!
3. No Civil Practice Act. There is no “discovery” in Magistrate Court. This means that a defendant may file an Answer that says “I don’t owe the money” and you cannot ask why. Sometimes a defendant has a legal reason for not paying assessments, like, the defendant’s property is not subject to the Declaration, but you will not know that, or be able to research that until the time of trial. Also, there are no pre-trial Motions. Even if the defendant states in his Answer that he knows he owes the money but disputes the amount, no Motion can be filed to dispose of the case. There will be a trial.
4. Judges. Magistrate Court Judges are not required by law in Georgia to be licensed attorneys. In the Metropolitan Atlanta area, all of the Magistrate Court Judges are licensed to practice law, and as in all Courts, some are more knowledgeable about contract and property law than others. However, it is not required by statute, and there are many sitting Magistrates in outlying counties who are not lawyers and may not understand obligations created by covenants running with the land at all.
5. Trial times. Most of the Metropolitan Atlanta Magistrate Courts have trials both in the daytime and at night. A calendar which starts at 7 p.m. can often run until 10 p.m. or later which may be inconvenient for attorneys and witnesses alike.
6. Attorneys’ Fees. Even though an Association may be entitled to Attorneys’ Fees by ‘contract’ and in the case of condominiums or POAA associations, by statute, Magistrate Court, intended as a forum for citizens’ easy access to Courts, is generally more reluctant than other courts to award fees.

Just because I have listed more “cons” than “pros” I absolutely do not mean to say that Magistrate Court is not a good option. Every Board should have a frank conversation with their legal counsel placing what weight they will on each of the considerations above and make a decision about what works best for their community!

1^ For comprehensive information about Magistrate Courts, see Wayne Purdom’s Ga. Magistrate Court Handbook (4^th Ed.), Harrison Company 2002.

…Or How to Collect the Judgment Once You’ve Got It”

In Part I of this Article, which appeared in the Second Quarter 2002 edition of Georgia Commons, we explored why it sometimes takes so long to obtain a judgment in Georgia. In the collection wars, many times obtaining the judgment is the easy part of the campaign and the biggest battle, actually getting the money into your association’s bank account, lies ahead. As you will see below, attorneys have many weapons in their arsenals for collecting judgments. But the most effective weapon of all is YOU the board and/or the management company. It is your cooperation that is essential in successfully collecting judgments. The same disclaimer applies to this article: The information provided here is intended to be a GUIDE for association members. No two cases are exactly alike, no two courts are alike and no two attorneys will handle the collection of a judgment in exactly the same way.

1. Preliminary Matters

A judgment is an order entered by a court awarding money to someone. The judgment gives the judgment creditor the right to take certain action against the debtor to secure payment of the debt which they would otherwise not have. It does not require the debtor to voluntarily pay you.

2. Writ of Fieri Facias

Once the judgment is entered, you will want to see that the court issues a Writ of Fieri Facias, more commonly referred to as a fi fa. (Some counties do this automatically under certain circumstances, but not others. Some counties do not issue them at all without a specific request and payment of a fee. Your attorneys will worry about this.) Fi fas are recorded in a book known as the county’s General Execution Docket, or GED. When checking down title on property scheduled to be sold or re-financed, title examiners always examine the GED. Any outstanding fi fa is an encumbrance on any property owned by the debtor in that county, which must be satisfied prior to the sale of the property. Practice tip: If you believe the debtor owns property in other counties, you may record the fi fa in the other counties’ GEDs as well. Fi Fas are valid for seven years but may be renewed. You do not need a fi fa to collect on a judgment, but because the average length of home ownership in the metropolitan Atlanta area is now five years, it is a good idea to have a recorded fi fa. Occasionally you will be pleasantly surprised by a call from a closing attorney asking for a payoff.

3. Ask For Your Money

The least expensive collection strategy is to write a letter to the judgment debtor and let him know that judgment has been entered against him and that he should call you to make payment arrangements to prevent formal collection procedures. Once in a blue moon it works and it costs you very little.

4. Garnishments

A garnishment is a new civil action which intercepts certain assets of the judgment debtor. There are at least three types of post-judgment garnishments in Georgia: bank accounts; rents, and wages. If your association or its management company regularly makes and retains copies of checks, it is simple to garnish a judgment debtor’s bank. There are bank locator services which can sometimes find where an individual banks. Generally you do not pay for this service unless they locate a bank for you. I do not know how these people provide this service and do not really want to know. Nonetheless, once an account is known, a garnishment is filed in the county in which the bank’s registered agent is located. Once the garnishment papers are served on the bank ALL of the judgment debtor’s assets in that institution are frozen. Your attorney will almost always receive a hysterical telephone call asking to release the garnishment. The judgment debtor will offer to pay the judgment as soon as the garnishment is released. BE STRONG. It is a terrible hardship on someone to know that their checks to the mortgage company, for their utilities and everything else are bouncing all over town. Nonetheless, insist on a payment of certified funds before releasing anything.

If a house or unit is being rented out, you can garnish the rent by naming the lessee as the garnishee in a garnishment action. This would be filed in the county in which the property is located and would be personally served on the renter. You must know the name of the renter, and that is another example of why it is critical for the association to be an active participant in the collection process. This is generally an effective method of collection because the entire monthly rent is subject to the garnishment and your judgment may be satisfied fairly quickly.

Wage, or continuing garnishments are, as you would expect, filed against the judgment debtor with his employer as the garnishee. If you know where the judgment debtor works, your attorney’s job is that much easier. If the association does not know where the judgment debtor works, a creditor may run a credit check which sometimes reveals a current employer. Once the garnishment is served the employer is required to file successive answers and pay twenty five (25%) percent of the disposable earnings for each pay period for up to 179 days.

5. Post-Judgment Discovery

If the Association has no information regarding where their judgment debtor works or banks and they still live in the community, you can pursue post-judgment discovery to learn where his assets are. This can be in the form or a series of written questions called interrogatories which are sent to the judgment debtor and which must be answered within thirty (30) days. In addition to questions regarding bank accounts and employment, questions regarding whether the judgment debtor has other assets, like jewelry or paintings or boats are asked. Sometimes the judgment debtor actually responds to these questions and you can file a garnishment. It has been my experience that the debtor does not respond to these questions. You may then file a motion with the court compelling a response within a certain number of days and asking for an award of attorney’s fees for having to have had to file the motion. Once the court has granted that motion, if the judgment debtor does not respond, you can file a motion for contempt, again asking for attorneys fees for having had to go this extra step. Motions for contempt, including a hearing date, must be personally served on the judgment debtor by a sheriff’s deputy. Because the judgment debtor has now disobeyed a court order compelling him to respond to the interrogatories, he may be found to be in contempt of court and can be incarcerated until you or your attorney gets around to going to the county jail and asking them the questions on the interrogatories and getting satisfactory answers.

In addition to, or in lieu of post-judgment interrogatories, you may schedule a post-judgment deposition. This deposition is an opportunity for your attorney to ask the same type of questions discussed above. If the judgment debtor does not appear for the deposition, the same procedure outlined above would be followed.

6. Execution and Levy

Execution and levy is generally a collection procedure of last resort. This is a complicated process which is generally not practical for homeowner and condominium associations because the amounts of the judgments generally do not justify the expense involved in actually seizing and selling assets. Nonetheless, a judgment creditor may identify specific assets, such as a grand piano or a car (which has no outstanding liens on it) to a sheriff who will seize the asset and arrange for its sale on the courthouse steps. Because there is generally very little interest in these items, the Association may not, after paying the sheriff’s fees realize the result it anticipated. Because of the complexity of this process it should not be attempted without the assistance of an attorney.

Of course, at any point in the collection process, either before or after the judgment is entered, the debtor may file bankruptcy. This will stop the process immediately and completely and any further collection will be through the bankruptcy court. A discussion of bankruptcy, and its effect on collections, is beyond the scope of this article.

Not much has changed since a Justice on the Georgia Supreme Court in 1878 wrote: “The true law, everywhere and at all times, delighteth in the payment of just debts. Blessed is the man that pays. The practice of paying promptly, and to the last cent, tends to the cultivation of one of the most excellent traits of human character. . . Debt is the source of much unhappiness. The best possible thing to be done with a debt is to pay it.” Robert v. Tift, 69 Ga. 566, 572 (1878).