Suspension Of Privileges In Response To Non-payment

Many community associations are dealing with an increased number of owners who are defaulting on their mortgages and failing to pay their maintenance assessments. The results have left some associations in financial distress with depleted reserves, and with decisions on which services to forego in order to make ends meet.

An associations options are limited when it comes to dealing with non-payment. Charging late fees, filing liens and starting foreclosures is the most common avenue and method to persuade members to pay; however, many associations also have the ability to suspend privileges to any member in arrears. The theory being that the assessments pay for those privileges and if a member is not contributing to the cost of those privileges and/or amenities, then they can be deprived of the benefit of using them.

In our practice we have found that applying this tactic can be an effective way to motivate prioritization of payment of association fees. When using this tool, it is important to follow proper procedures, otherwise the member may have the ability to show that the suspension of their privileges was improper or invalid.

Which privileges an association can suspend will vary depending upon what the governing documents allow. Some of the most common privileges an association can suspend are voting privileges; use of the pool, playground, park, tennis courts, golf course, and other recreational amenities; use or rental of the clubhouse; use of common laundry facilities (if paid for through dues and not coin operated); and the right to park a car on the common property (may include parking privileges for guests). Delinquent members should not get a say in association business nor should they enjoy the privileges other members have paid for until they contribute their share of the expenses.

If your association wishes to pursue suspension as a means to stimulate payment, it is important to check your governing documents to ensure that the documents allow for suspension, or amend the documents to include the language. Look for actual suspension language and for language regarding a requirement that members be in “good standing” to have access to amenities, serve on the board, and vote. When the documents allow for suspension, courts have been found to be sympathetic to the associations case when challenged.

It is very important that when implementing this type of action, you give the owner adequate notice of your intent to do so. Not only should notice be given, but in some instances it may be necessary to give the member an opportunity to be heard before the board prior to instituting the suspension. This type of action would be noticed and proceed just like an enforcement proceeding.

Enforcing the governing documents with regard to non-payment and using suspension as the form of enforcement on the membership can and may cause some owners to challenge the board’s decision. It is important to be able to show the court that the association followed the proper procedures in pursuit of a remedy and that the decision to suspend was fair, reasonable, and that it was made in good faith. To demonstrate the fair, reasonable nature of the board’s decision, it is imperative that the board give proper and adequate notice and that the board keeps accurate and thorough records of the events that lead to the suspension.

An association needs to be careful and aware of the impact a bankruptcy filing would have on the suspension of privileges within the community. As soon as a bankruptcy is filed, any action to suspend voting rights or the access to amenities must be ceased. Continuing the suspension can be seen by the bankruptcy court as an attempt to collect amounts that are protected by the court. However, if a member then stops paying ongoing fees after the bankruptcy, the association could deny privileges, if the association obtains the approval of the bankruptcy court to do so.

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