When should a community association foreclose against a delinquent owner?

Almost every association has that ‘one owner’ that always appears to be delinquent in the payment of his/her assessments. In most cases, it is typically not a good idea to pursue a foreclosure lawsuit as a first resort to collect delinquent debt. However, there may come a time when the board decides that ‘enough is enough’ and it is time to take more drastic action to put an end to a delinquency. Ultimately, the board is permitted to exercise its business judgment to determine whether or not to proceed with a foreclosure lawsuit so long as all legal requirements are met before filing the lawsuit.

The Colorado Common Interest Ownership Act (CCIA) sets forth two requirements before an association can commence a foreclosure lawsuit:

(a)   The delinquent owner must owe at least six months of assessment fees. For example, if the monthly assessment charges are $100.00, then the owner must owe the association a minimum of $600.00. The $600.00, in this example, can be comprised of late charges, interest, legal fees and other legitimate charges to reach the required threshold; and

(b) The executive board of directors must authorize the filing of the foreclosure lawsuit. Meeting minutes documenting the board’s approval of the foreclosure will suffice as will a written resolution from the board. It is important to note that the authorization to foreclose cannot be delegated to a community association manager, attorney or any other individual or entity.

In addition to the requirements of CCIOA, an association should check its governing documents, including its mandated collections policy, to see if any other requirements or notices must be sent to a delinquent owner before proceeding with a foreclosure.

Feel free to contact The Dupont Law Firm, LLC if you have any questions relating to the foreclosure process.