2022 Collection Issues

HB 22-1137, which became law in August of 2022, imposed new hurdles for associations in the collection of delinquent accounts – namely:

Administrative Obligations.

Associations are now obligated to keep a record of contacts made with delinquent owners. Although many professional management companies already have such procedures in place, the obligation now includes reference to the type of communication and the date and time that contact is made. Additionally, an owner may identify another person to serve as a designated contact. A further obligation is the requirement to mail (and email if available) delinquent owners, each and every month, an itemized statement of the balance owed. Such obligations create a “minefield” for the association and opportunity for owners to challenge, in the event legal action is taken to collect a delinquency.

Adopt a Compliant Collection Policy.

HB 22-1137 required virtually all associations to update their collection policy. Indeed, the failure to do so prohibits the association from taking legal action. It also prohibits engaging a collection agency to assist in the recovery of delinquent accounts. Any association that has not already done so is encouraged to contact its attorney to determine if an update to its policy is necessary.

Follow the Collection Policy.

One of the owner’s strongest and most common defenses in any lawsuit with the association is to assert that the association failed to adhere to its collection policy. This falls under the category of assuring that you cross your T’s and dot your I’s. Failure to do so can cost an association a substantial amount of time and money.

Assure Proper Notice to the Owner.

HB 22-1137 requires the association, prior to referral to their attorney, to deliver notice of the delinquency by three separate means. It can be delivered by certified mail, return receipt requested; physically posting a copy at the unit; and a third copy delivered either by first-class mail, text to the owner’s cell phone, or by email.

Timely Referral to the Association’s Collection Attorney.

An item of importance that has not changed is the need to address delinquencies in a timely manner. Do not sit on delinquencies. This is where the collection policy is the association’s best friend. It dictates proper procedures, including when to refer the file to your attorney.

Associations have a fiduciary obligation to collect assessments. Delinquencies cannot be ignored. Although HB 22-1137 created hurdles, associations can overcome them with planning and adherence to the procedures outlined in the collection policy. When in doubt, consult with your collection attorney.