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Monday, July 20, 2009

Ind. Law - "Unpaid homeowner association dues split neighbors"

Benjamin Lanka has this story today in the Fort Wayne Journal Gazette. Some quotes:

A sputtering economy with piling job losses has forced many local residents to pick which bills to pay.

One such bill increasingly going unpaid is homeowner association dues, forcing those neighborhoods to increase collection efforts.

Liens filed by neighborhoods in Allen County against their residents over uncollected dues are increasing. Associations are even filing lawsuits to ensure they get the money needed for maintenance of community areas and other services. A newly enacted state law, however, will give the two sides time to resolve their problems without resorting to the court system, according to one of the law’s authors. * * *

Katrina Newcomb, vice president of The Newcomb Group, manages association dues collections for several Fort Wayne neighborhoods. She said just this year the number of unpaid dues for her neighborhoods jumped 10 percent.

“Our phone has been ringing off the hook because our neighborhoods are getting in this predicament,” she said.

The unpaid dues range from $91 to $350, Newcomb said, adding her business would be even busier except many associations don’t feel they can pay for collection services.

The reasons for the jump aren’t surprising. People are struggling to hold jobs and pay their mortgages, said Terry Cornelius, an attorney for Arlington Park.

“People are reluctant to pay association dues for homes they are going to lose,” he said.

The northeast-side Arlington Park neighborhood association has filed the most liens over the past 2 1/2 years, which Cornelius said isn’t surprising because of its large size. It charged homeowners $670 this year for association dues. * * *

Cornelius said the association follows a fairly routine schedule for collections. The dues are due by Jan. 1. If they aren’t paid by April, a lien is filed. A letter then goes out in May followed by a lawsuit in June.

He said the association tries to work with people who can’t pay the dues, including setting up payment plans. People in trouble, however, should contact the association to seek assistance, a sentiment echoed by neighborhood associations across the city.

Putting effort into collections is necessary, Cornelius added. If people were allowed to not pay, responsible homeowners would be forced to pay higher fees to care for the entire neighborhood, he said.

A lack of home sales has forced collectors to be more aggressive, Newcomb said. Because liens must be paid when a house is sold, the issues were typically handled quickly during an active real estate market. Now that homes are staying on the market for much longer, Newcomb said those liens remain unpaid. This has led more associations to pursue lawsuits against homeowners as a way to get their fees.

A state law didn’t help in mediating disputes between homeowners and associations, according to Grant Shipley, Wildwood Park president.

When an association filed a lien against a homeowner, the association was required to file a lawsuit within a year to prevent the lien from expiring, he said. This put association members in uncomfortable positions of having to file lawsuits against their neighbors, some who simply couldn’t pay.

“They made us be heavy-handed,” Shipley said. “It caused lots of problems. We had to go threaten lawsuits against people.”

Wildwood Park’s fees range from $16 to $94 annually based on lot size, Shipley said.

Those concerns prompted lawmakers to intervene this year, overwhelmingly approving House Bill 1071. Rep. Phil Hinkle, R-Indianapolis, wrote much of the bill after hearing complaints from homeowners and associations.

Much of the law involves changes to how new homeowner associations can operate. Existing associations can vote to be included under the new rules, meant to help resolve conflicts.

But a key provision applies to all homeowners involving lawsuits. Now an association must file its lien within a year, but a lawsuit can’t be filed until 12 months have passed. The suit must be filed within five years. That section went into effect July 1.

Cornelius, Arlington Park’s attorney, said he was unaware of the law change but would investigate how that affects the association’s procedures.

Shipley said the new law will help with collections. He said the association will still file liens, but bases enforcement efforts on each person’s ability to pay. The important piece is to encourage both sides to work together, he said, to make a successful association and prevent conflict.

The House bill added a new Article to the Indiana Code, IC 32-25.5, titled "Homeowners Associations." In addition, as discussed in today's story, the bill amended IC 32-28-14-8 to provide that the complaint to enfore a homeowners association lien may be filed within five years. IC 32-28-14-9 is also changed.

Posted by Marcia Oddi on July 20, 2009 08:25 AM
Posted to General Law Related