Managing Your Law Firm, Bad Debt & Legal Fees

The Board of Directors of a Condominium, Homeowner, or Cooperative Association manages the affairs of the community, and as part of that responsibility retains vendors and professionals to assist them. Most communities retain at least one law firm. Your Board of Directors may manage legal counsel personally or delegate that responsibility to the property manager. Either way, it’s critical that the Association properly manages their legal counsel as well as their legal costs.
When retained by an Association, the legal counsel actually works for the corporate entity that is the Association and owes a fiduciary duty to it. The firm takes direction from the Board of Directors but does not work for any individual owner or board member. Your Association’s legal counsel assists with collecting assessments and enforcing the governing documents. Because state statutes and the legal landscape is constantly changing, keeping an open line of communication between the Board of Directors, property manager, and law firm is critical.
Boards should consider the importance of each issue being considered and the associated legal fees incurred when retaining and managing their law firm. Some Boards utilize legal counsel and vendors to defer or eliminate the legal costs associated with the collection of assessments and collection-related litigation.
If you have bad debt and unpaid Association dues, ask yourself these questions:

  • What is your community’s amount of bad debt and the legal fees and costs incurred in pursuing collection of the debt?
  • How much were you forced to write-off this year?
  • What are you expecting to collect and write-off in the year to come?

Write-offs for bad debt, late fees and legal fees should be the exception, not the rule.
Focus your Association’s legal budget on other matters relating to amendment or enforcement of the governing documents. Associations should budget for uniform enforcement of the governing documents and keeping the documents updated with amended state Statutes and appellate decisions. Homeowners associations in states such as Florida should also budget for MRTA (Marketable Record Title Act) compliance and the preservation of the community.
LM Funding provides funding solutions to condo and homeowner associations (COAs & HOAs) to recover delinquent association dues and guaranty future association budgets using proprietary technology.