7 Do’s and Don’ts for Homeowners’ & Condo Association Dues Collections

Acting as a homeowners’ or condo association board member often involves making demands of your neighbors. When those demands take the form of unpaid association dues collections, you need to be careful. Make certain your HOA or COA is following the law for collections by following these do’s and don’ts:

Do Have a Formal HOA Dues Collections Policy

Not every condominium complex or homeowners’ association has a written, formal dues collections policy. Federal law doesn’t require them. However, there are several state and federal laws that control how an HOA or COA collects overdue association dues and assessments. Preparing a formal HOA dues collections policy can help you make sure you stay on the right side of these laws. A well-written homeowners’ association collection policy should:

  • Define the assessments and dues the HOA may impose
  • Set due dates and overdue dates when dues are considered “delinquent”
  • Describe any fees or interest the HOA will charge
  • Outline the steps the HOA will take for delinquent assessments
  • Identify collections agencies or attorneys the HOA will work with to collect debts

Don’t Enforce Condo Association Dues Collections Unevenly

As board members, you may empathize for a neighbor you know is having a hard time. You might also want to “throw the book at” a condo owner who causes trouble. However, uneven enforcement of your condo association dues collections procedures can make it harder to take uncooperative property owners to court. Your policy may allow you to make exceptions based on need. However, there should be formal process for requesting relief, and for making sure board members consider each request in good faith.

Do Have Payment Plan Options Available

One way to accommodate COA members with cash flow issues, or who simply forget to write their assessment check is to make payment plan options available. There are ways to automate the collection of regular COA dues and allow property owners to sign up for automatic payments. You could also allow them to break up annual assessments into monthly or quarterly payments. This will help your community have the money it needs to maintain the property without the need for collections.

Don’t Arbitrarily Add Late Fees, Fines, or Interest to the Bill

The threat of interest and fees are a good way to make condo owners pay dues and assessments on time. However, association boards can’t just make these up as you go along. Any late fees, fines, or interest must comply with consumer protection laws and generally should be included in the association agreement your property owners sign when joining the community.

Do Send Notices of Delinquent Assessments

It may seem like an unnecessary step, but often sending your property owners a notice of delinquent assessment can save homeowners’ associations time and trouble collecting those unpaid amounts. Be sure your notice clearly states how much is owed, and when it must be paid to avoid becoming delinquent. It should also describe the next steps the HOA will take – such as charging interest or sending the matter to collections – if the assessment becomes delinquent.

Don’t Violate the Consumer Protections Laws for Debt Collection

HOA assessments and fees are considered “consumer debts” under the federal Fair Debt Collection Practices Act (FDCPA) and the Michigan Regulation of Collection Practices Act. That means your HOA board must follow collections rules and regulations designed to protect consumers against “abusive,” “unfair,” or “misleading” debt collections. There are some technical requirements involved, so if your HOA decides to pursue collections, it is wise to work with a debt collector who is familiar with the federal and state statutes.

Do Work with an Attorney to Collect Delinquent Homeowners Association Dues

If informal efforts to collect your homeowners’ association dues or condo association assessments fail, it is time to call in an attorney. While debt collectors have a number of tools at their disposal, attorneys can take collections further. By filing lawsuits and issuing liens against the property, a real estate attorney can make certain delinquent assessments get paid.

At Lachman King, our experienced real estate attorneys have been helping condo and homeowners’ association boards manage unpaid dues and assessments for years. Our team can help you create and enforce a formal dues collections policy, so your board has the money it needs to maintain a beautiful and functional community. Contact us today to set up a meeting.

Construction Liens: What General Contractors Need to Know to Get Paid

Running a commercial construction company involves big risks. General contractors often put forward substantial resources in materials and labor, trusting their customers to honor their real estate improvement contracts. When they don’t, you may need to fall back on construction liens to get paid. But collecting construction costs through the Michigan Construction Lien Act depends on having the right paperwork in place, even before you start the project.

How the Michigan Construction Lien Act Works

Michigan’s Construction Lien Act helps general contractors and subcontractors enforce their construction contracts. When a property owner fails to pay, a company with a properly registered construction lien can collect proceeds from the sale of the property, or even foreclose on the property to get the money they are owed. However, the law will not work unless you follow the proper steps and provide the proper notices to your customers and the state.

Step 1: Prepare and Sign the Commercial Construction Contract

Construction companies should always have a written construction agreement, either through a signed bid form or a fully negotiated construction contract. This contract should lay out the:

  • Scope of work to be performed
  • Estimates of materials and labor costs
  • Payment schedules and amounts
  • Agreement that the contractor may seek enforcement through a construction lien

While a contractor can sometimes take advantage of the Michigan Construction Lien Act without a formal contract, doing so makes it far more difficult to prove that the project is complete, and the property owner has failed to pay in full.

Step 2: File a Notice of Commencement with the Register of Deeds

Before your teams begin any improvement of the property, the property owner is required to record a Notice of Commencement with the Register of Deeds office. This notice should list the:

  • Legal description of the property
  • Names and addresses of the owner and/or lessee of the property
  • General contractor
  • Specific language included in the Construction Lien Act

Property owners may not realize they need to file this notice, so it may be up to you to provide the form.

Step 3: File Notice for Professional Service Contract for Designer Subcontractors

If you are a “design and build” team, your designers may also file a Notice of Professional Services Contract with the Register of Deeds. The notice can be filed at any time after the contract is signed until 90 days after that phase of the work is complete.

Step 4: Begin Work and Send a Notice of Furnishing to the Property Owner

Once work begins, each subcontractor or supplier who provides labor or materials on the project must serve a Notice of Furnishing to the property owner’s designee, and the General Contractor within 20 days after the first delivery or day of work.

Step 5: Provide Sworn Statements to the Property Owner

When it is time to collect payment, the General Contractor needs to provide a sworn statement describing each contractor, supplier, and laborer who worked on the project, and an itemized list of amounts due to each person. This notice should reflect payments made to date, and the amount currently owed to each person in the project.

Step 6: Record a Claim of Lien if Payments are Missed

If the property owner doesn’t pay on time, you can begin collections efforts. This starts by recording a Claim of Lien at the Register of Deeds’ office within 90 days of the last improvement on the property. General contractors, subcontractors, and laborers can all file Claims of Lien.

Step 7: Enforce Construction Lien Through Foreclosure Action in Court

A construction lien is an effective way for general contractors to get paid because it allows them to file a foreclosure action in state court if property owners fail to make payments. These lawsuits must be brought within one year after the claim of lien is recorded and served on the property owner. Often there will be a countersuit for breach of contract if the property owner believes the construction was not completed properly and on time, that is why it is essential to hire an experienced real estate attorney to file and enforce your construction lien.

Step 8: Discharge the Construction Lien Upon Payment or Foreclosure Sale

Often, simply threatening the foreclosure lawsuit is enough to get a property owner to pay off their balance. In other cases, after you win your foreclosure action, the property will be sold at a Sheriff’s sale, and you will be paid from the proceeds. No matter how you receive payment, the final step is to discharge the construction lien by sending written confirmation to the owner and anyone else making payments. This will allow the property to be sold or financed in the future.

Assisting General Contractors and Subcontractors in Preparing, Perfecting, and Enforcing Construction Liens

Perfecting and enforcing construction liens can be difficult. That is why every general contractor should have a relationship with an experienced real estate attorney who knows the process and can help ensure your next contract is paid. At Lachman King, our team works with general contractors, subcontractors, and suppliers, helping them with any construction law and litigation challenges. Contact us today to set up a meeting.

Michigan’s Right to Farm Act: Is Your Family Farm Protected?

Michigan has a long history of family farms and closely held agricultural businesses. However, depending on where that farm is located, Michigan’s Right to Farm Act may or may not protect you from local ordinances limiting how you do business. Here’s what you should know about the limits on agricultural uses of urban and suburban land.

What is the Right to Farm Act?

The Michigan Right to Farm Act (RTFA) is a state law designed to protect farmers against civil nuisance lawsuits for the sights, sounds, and smells that agricultural land use involves. It also limits local cities and municipalities from passing certain local ordinances limiting covered farming activities. It is designed to keep local governments from setting limits on farmers related to:

  • Food standards
  • Site plans
  • Septic systems
  • Nutrient management plans
  • Pesticide and herbicide use including manure use
  • Seeds and planting
  • Transporting hazardous materials
  • Working with local charities
  • Possessing livestock (provided they are given adequate care)

The RTFA does this through legal “preemption.” Put simply, any local ordinance that would extend, change, or conflict with the Right to Farm Act is overruled by the state statute.

Does Your Family Farm Qualify for Protection?

For your family farm to qualify for protection under Michigan’s Right to Farm Act it must:

  • Be a “farm operation” operated and maintained for the production, harvesting, and storage of agriculture
  • Produce “farm products” including agricultural crops and animal products incorporating “the use of food, feed, fiber, or fur”
  • Sell agricultural products for “commercial purposes” including even the smallest amount of commercial activity
  • Follow the Generally Accepted Agricultural and Management Practices (GAAMPs) in some cases

What are the Generally Accepted Agricultural and Management Practices (GAAMPs)?

GAAMPS are guidelines that the Michigan Commission of Agriculture and Rural Development sets out for farm operations across the state. These guidelines are updated each year to reflect technology improvements and environmental protection concerns. While every farm must comply with federal and state environmental laws and animal abuse laws, family farms may choose not to GAAMPs. However, choosing not to can limit how much protection the Right to Farm Act provides.

What About Urban Farming Initiatives?

If your family farm is in an urban or suburban area, the local government may prefer to see you give up agriculture in favor of other land uses. In other cases, you may own property within city limits that you decide to convert to urban farming. In 2019, the Michigan Commission of Agriculture and Rural Development issued a decision that stripped many backyard farmers from protection under the Right to Farm Act. It approved a Site Selection GAAMP that barred animals “if the site is determined to be primarily residential, and zoning doesn’t allow agriculture as use by right.”

This ruling can create problems for family farms, which may have been passed down through the generations while suburbs and neighborhoods grew up around them. It would allow local governments to, for example, prevent the ownership of roosters, or limit the heads of livestock within residentially zoned areas.

What Are Your Options when Local Ordinances Limit Agriculture?

The Department has a Right to Farm program designed to respond to nuisance complaints and determine whether farms are complying with the GAAMPs. However, farming families may sometimes need to may need to hire a real estate attorney to work with municipalities, applying for zoning variances and advocating for grandfathered exceptions to new ordinances. When none of that works, a real estate lawyer can also help you determine if you qualify for protection, and enforce your family’s right to farm.

At Lachman King, our experienced real estate attorneys have been farming families resolve their agricultural real property disputes for years. Our team will meet with you to explain your rights, and help you make the right call for your family farm. Contact us today to set up a meeting.

MICHIGAN ZONING ENABLING ACT Act 110 of 2006 AN ACT to codify the laws regarding local units of government regulating the development and use of land; to provide for the adoption of zoning ordinances; to provide for the establishment in counties, townships, cities, and villages of zoning districts; to prescribe the powers and duties of … Read more

INCORPORATION OF SUMMER RESORT OWNERS Act 137 of 1929   AN ACT to authorize the formation of corporations by summer resort owners; to authorize the purchase, improvement, sale, and lease of lands; to authorize the exercise of certain police powers over the lands owned by said corporation and within its jurisdiction; to impose certain duties … Read more

NONPROFIT CORPORATION ACT Act 162 of 1982 AN ACT to revise, consolidate, and classify the laws relating to the organization and regulation of certain nonprofit corporations; to prescribe their duties, rights, powers, immunities, and liabilities; to provide for the authorization of foreign nonprofit corporations within this state; to impose certain duties on certain state departments; … Read more

LAND DIVISION ACT Act 288 of 1967 AN ACT to regulate the division of land; to promote the public health, safety, and general welfare; to further the orderly layout and use of land; to require that the land be suitable for building sites and public improvements and that there be adequate drainage of the land; … Read more

DEPARTMENT OF LICENSING AND REGULATORY AFFAIRS DIRECTOR’S OFFICE CONDOMINIUMS MICHIGAN CONDOMINIUM ACT RULES (By authority conferred on the department of licensing and regulatory affairs by section 142 of 1978 PA 59, MCL 559.242, and Executive Reorganization Order Nos. 1996-2, 2003-1, 2008-4 and 2011-4, MCL 445.2001, 445.2011, 445.2025 and 445.2030) PART 1. GENERAL PROVISIONS R 559.101 … Read more

COMMERCIAL REAL ESTATE BROKER’S LIEN ACT Act 201 of 2010 AN ACT to create a lien against real property for unpaid commercial real estate broker’s commissions and services; and to provide remedies. History: 2010, Act 201, Imd. Eff. Oct. 5, 2010. The People of the State of Michigan enact: 570.581 Short title. Sec. 1. This … Read more

NATURAL RESOURCES AND ENVIRONMENTAL PROTECTION ACT (EXCERPT) Act 451 of 1994 PART 325 GREAT LAKES SUBMERGED LANDS (Great Lakes Submerged Land Act) 324.32501 Additional definitions. Sec. 32501. As used in this part: “Department” means the department of environmental “Director” means the director of the “Marina purposes” means an operation making use of submerged bottomlands or … Read more