West Virginia Homeowners Associations Found to be Debt Collectors
In West Virginia, homeowners associations (HOAs) now need to worry about how they go about collecting delinquent fees. If HOA debt collection efforts do not comply with the West Virginia Consumer Credit and Protection Act (the WVCCPA), an HOA could face a civil suit and steep penalties. The Supreme Court of Appeals in West Virginia recently examined HOA collection of delinquent association fees in Fleet v. Webber Spring Owners Association, Inc., No. 14-0637 (January 2015).
The first issue raised in the appeal was whether the Association had the right to place a common law lien against real property as part of its efforts to collect delinquent fees. The Court concluded that common law liens can be placed against real property if the liens at issue are consensual. In this case, based on the homeowner’s deed and the Association’s declaration, the Court held that the homeowners entered into a contract permitting the Association to place a common law lien against their property. This part of the decision imposed no additional burdens on Associations.
Unlike the lien issue, the second issue addressed by the Court creates a number of issues that may pose significant liability for any HOA attempting to collect delinquent fees. In particular, the Court concluded that HOAs attempting to collect delinquent fees are “debt collectors” as that phrase is defined under the WVCCPA.
By being classified as debt collectors, HOAs now find themselves subject to the various debt collection provisions of the WVCCPA as well as other restrictions imposed by the WVCCPA. Of particular concern, each proven violation of the WVCCPA’s debt collection provisions imposes a mandatory penalty of $1,000. The prevailing party likely would be entitled to his or her attorney’s fees in full. Id. at 5-104. As many debt collectors have learned, violating the WVCCPA easily can result in penalties that exceed tens of thousands of dollars. In some cases, debt collectors have been found liable for penalties exceeding hundreds of thousands of dollars.
For example, each attempt to collect a debt from a homeowner who is known to be represented by an attorney would be a statutory violation as outlined in W. Va. Code § 46A-2-128(e). Of additional note, Sections 46A-2-127(d) and (g) and 46A-2-128(d) contain language limiting what a debt collector can assert when attempting to collect a debt. In particular, an HOA should be cautious regarding what fees, including post default interest, it attempts to recover as those statutory subsections limit certain fees unless the fee is permitted by an agreement or law.
In summary, the new classification of HOAs as “debt collectors” subject to the WVCCPA’s debt collection constraints likely warrants consultation with an attorney to ensure that their polices and practices are compliant with West Virginia law.