If you are a board member or a licensed community association manager, you’ve probably reviewed an invoice from your collections services provider, whether it be a law firm or a collections agency, and wondered whether the amounts you see charged are reasonable. Because many of us in this business offer to handle your collections at no up-front bill to the associations that we represent, the only person that ever sees what is being charged is the delinquent owner. However, if you ever get stuck having to pay the bill (for instance, if you’re dissatisfied with the progress of collections and want to go with a different law firm), the numbers that you see can be quite alarming. In Florida, fees related to collections must be “reasonable,” but it seems that some take the position that “reasonable” means “whatever we can get away with.” Is there any way to prove that some of these practices are crossing the line?
WHAT IS REASONABLE?
In November 2015, a Texas court ruled on this very issue. Several homeowners successfully got a lower court to stop Stewart Beach Condominium Homeowners Association from foreclosing on their units because the attorney’s fees on their accounts were excessive and unconscionable, and so, Stewart Beach appealed that decision. The attorney for the condominium charged a flat fee of $300 for pre-suit demand letters (including a lien), plus a 20% contingency fee on all collections, plus an additional hourly fee for his and his paralegal’s time. In his pre-suit demand letters, the attorney demanded attorneys’ fees ranging from $1,600 to $2,150, which were held to be “clearly excessive, unreasonable, and unconscionable” by the lower court which determined that reasonable pre-suit fees would have only been $300. On appeal, the lower court’s decision was upheld. Among other things, the appellate court noted that charging a contingency fee on top of other fees is excessive, and “particularly unreasonable given that the [assessments] were comparatively small dollar amounts compared to the value of the condominiums.”
As this is a Texas ruling, it has no effect on us here in Florida, but it definitely provides valuable insight and you should be able take a lot from this case. First, if you know that delinquent owners within your community are being charged almost $2,000 in fees before a lawsuit is even filed, that likely would be considered excessive, unreasonable or unconscionable. You also know that adding a contingency fee on top of already-defined fees might likewise raise an eyebrow or two.
WELL THAT’S NOT MY PROBLEM…IS IT?
But if your collections services provider is not billing you up front, why should you care? It’s the owner’s fault that they became delinquent in the first place, so why should the boards care what is being charged to them at all? Well, if you care about the well-being of your community, you should actually care very much about the fees! First, rapidly increasing and undeterminable fees can prolong the time that it takes your collections service provider to collect and disburse money to you. Second, if for any reason the provider is unable to collect from the owner, or you decide you want to work with a different provider for collections, you will be stuck paying that bill, and you don’t want to be surprised or stuck when that happens. Third, there’s a chance the judge may deny the fees as the court in Texas did, thus preventing or delaying your foreclosure of your lien, and leaving you with a hefty bill in collections fees.
To us, the biggest reason you should care is that we are all in the business of building better communities. At our firm, we do not blame people for their financial problems. We work with your neighbors and make sure our fees do not become a deterrent to you lowering your delinquencies. Our pre-suit fees are generally about $225 and our flat fee for foreclosure actions is $1,300. We don’t cross the line into unreasonableness. Contact us today to learn more about our qualifications and our fee schedule, and let’s work together to build a better community!