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Staying the Course: Assessment Collection During (and After) the Coronavirus Pandemic

The coronoavirus pandemic, with its stay at home mandates and work restrictions, is hitting the economy hard. Community association boards and managers should anticipate adverse impacts in the collection of assessments as early as April and must be prepared to address these delinquencies.

Increased Delinquency

Many people are out of work because their employers have had to suspend or reduce operations. These people are not receiving a paycheck. Some may be receiving unemployment benefits, if they can manage to file a claim on the overloaded system, and some may receive a stimulus check from the federal government, but those benefits will not replace their prior income. When deciding which bills are a priority, your members may make the difficult decision that association assessments are paid last or not at all. Expect to see a sharp increase in delinquencies.

Assessment Collection Policies and Budgets

Boards and managers are concerned – certainly for the well-being of their members but also for the well-being of the association – and have asked whether their collection policies should be relaxed. Now is not the time to relax those policies. Community associations can only operate with assessment revenue. As an example, the snow vendor that will clear the roads and sidewalks in December must be paid and if the association does not collect assessments it will not be able to make those critical payments. While there may be discretionary budget items that can be cut – certain projects may be delayed if they do not involve health and safety and some expenses may be extras, such as mums in the fall – most items on the community association budget are critical operations.

Accordingly, in order to address increased delinquency and meet critical budget items, we recommend that community associations keep their current collection policies in place. Hardship cases can be handled as they are presented on a case by case basis. Some members will need a repayment plan and we have every expectation that association boards and managers will work with those with true hardship. Keep in mind that not all individuals who miss assessment payments have been impacted by the economy. Some individuals may not have missed a single paycheck but may still receive a stimulus check from the federal government as part of the $2 trillion stimulus plan.

Recording Liens

County offices are closed for now. However, in many counties clerks are working remotely to do e-recording. We are able to e-record liens once an account has been setup to do so. This allows title agencies, mortgage lenders, lawfirms, and other businesses to record documents, and to check the status of filed documents on-line. Also assisting associations in carrying out their collection process is the Remote Notary Bill, which was recently passed (pending signature by Gov. Murphy) to allow notaries public to perform certain acts remotely. The bill allows notaries to notarize documents, such as liens, by using communication technology to obtain satisfactory evidence of the identity of the individual signing the document. Liens can be signed and notarized remotely, and then recorded with the county clerk via e-recording.

Impact on Litigation

Similarly, courts have been closed. While cases can be commenced and are proceeding in the interim – by efile, telephonic motions, etc. – there will be some delays in cases. This should not stop associations from making the decision to file litigation when necessary. Waiting to pursue litigation until the delinquency balance is very high could put the association in a dire financial situation.

Few community associations will avoid at least some adverse financial impact of the coronavirus pandemic. However, those which stay the course in assessment collection will have a better chance at emerging from it in a better financial position.



About this Author

Mary W. Barrett, Stark, Homeowners Associations Lawyer, Housing Cooperatives Lawyer

Mary W. Barrett, Shareholder, has been practicing in Stark & Stark’s Community Associations Group since 1998. She concentrates her practice in the representation of homeowners associations, condominium associations, and cooperatives throughout New Jersey. 

Ms. Barrett assists community associations with contract preparation and review, policy resolutions and rule creation, amendments to governing documents, covenant enforcement, trustee elections, governing document interpretation, assessment collection, transition, loans and financing,...

Melissa A. Volet, Stark and Stark, Resolution Drafting Lawyer, Complex Collection Matters Attorney

Melissa A. Volet is a Shareholder and member of Stark & Stark’s Community Associations Group since 2005. The practice is focused on drafting service contracts, drafting resolutions and amendments, rule and regulation creation and enforcement, complex collection matters, litigation, and developer transition.

Ms. Volet is an active member of the New Jersey Chapter of Community Association’s Institute (“CAI”), and a recipient of the Committee of the Year Award in 2011. She is also frequently invited by management companies to speak to their employees about collection litigation and strategy.

Ms. Volet is honored by her inclusion in New Jersey Monthly Magazine’s list of New Jersey Super Lawyers Rising Stars in 2011 and 2012