Community associations continue to suffer from very high delinquency rates which is a reflection of the national trends of consumer debt. However, because community associations need to be vigilant in keeping its delinquency rates manageable (as these monies are needed to provide promised services to its members), debt collection is a very big part of an association’s day-to-day activities.
It is not very difficult to obtain a judgment against a member for failure to pay the monthly maintenance fees since there is an irrefutable obligation to do so based on a community association’s governing documents, and as for condominiums, a statutory requirement to do so. However collecting the judgment is where attorneys who represent community associations differentiate themselves.
Once a judgment is obtained, a number of expedient means to collect exist including a bank levy of the judgment debtor’s account (monies frozen so that the community association can "take" those sums), rent levy (rents paid to the judgment debtor are instead given to the community association), and wage garnishment (percentage of the judgment debtor’s pay is given to the community association). When these methods of collecting prove impossible or impractical, the community association can have its attorney "depose" the judgment debtor at an asset deposition.
In order to get an asset deposition the community association must obtain an Order from the Court. These are typically freely given since the community association is entitled to relief. The Order requires the judgment debtor to appear before the community association’s attorney at a given place, date, and time. If the attorney fashions the relief requested properly, it also requires the judgment debtor to bring to the deposition all asset information about the judgment debtor (tax returns, bank account statements, etc). At the deposition, there is generally the attorney for the community association, the judgment debtor, and a court reporter. The court reporter is there to make a transcript of the proceedings in the event additional Court action required. These proceedings are just like being in Court where the judgment debtor placed under oath to tell the truth. The deposition then proceeds.
What happens if the judgment debtor disregards the Judge’s order to appear? The community association immediately goes back into Court and seeks an Arrest Order for the judgment debtor disobeying the Judge’s Order. Once the Arrest Warrant papers served upon the judgment debtors, most will then call to schedule the deposition. Others get arrested and the community association’s attorney generally travels to where the judgment debtor is being held so the deposition may be taken.
While the above could be a bit expensive in my experience, most judgment debtors are shaken enough to the point that they make payment arrangements. While there is no guaranty an asset deposition will yield asset depositions, it is a useful tool.
Community associations need to recognize the need to take their collections seriously, and make every "reasonable" effort to make judgment debtors understand they cannot walk away from every member’s payment obligations.
Christopher Florio is Chair of Stark & Stark’s Community Associations Group. For questions, or additional information, please contact Mr. Florio.