Senate Bill 20-211 and HOA Collection Efforts

Senate Bill 20-211 was just signed into law on June 29, 2020, and puts temporary restrictions on debt collectors pursuing certain debt collection actions. The law prohibits a debt collector from taking “Extraordinary Collection Actions” if certain prerequisites are not met. The prerequisite is that the debt collector is required to send a notice to the debtor advising that the debtor has the right to request temporary suspension of certain collection actions if they have been financially impacted by COVID-19. The debtor then must be given between 10-60 days to respond to the notice. If a debtor claims they have been financially impacted by COVID-19, the Creditor is then prohibited from taking the Extraordinary Collection Action during the term of this law, which is scheduled to expire on November 1, 2020, but may be extended to February 1, 2021. The collection actions that are restricted are actions that would cause a seizure of the debtor’s property to resolve a debt, such as garnishment of a debtor’s wages or bank account. As this law is new, we have provided the following information in an attempt to clarify how this law will affect HOA’s attempting to collect delinquent assessments.

Please note that our firm must now review every file on the current status reports to verify whether the law affects the next collection step we were planning to take on each particular file. As such, status reports may be delayed a bit this month, for which we apologize.

Q.  What does Senate Bill 20-211 (“SB 20-211”) do?

 A.  SB 20-211 prohibits a judgment creditor from initiating a new “Extraordinary Collection Action” from now until November 1, 2020 (which may be extended to February 1, 2021), unless prerequisite actions are taken. 

 Q.  What are the “Extraordinary Collection Actions” that are restricted by SB 20-211?

 A.  Any Action or proceeding in the nature of:

  • An “Attachment” or “Writ of Attachment”:  A court order to “attach” or seize an asset on behalf of a creditor;

  • A “Garnishment” or “Writ of Garnishment”:  An Order requiring a third-party (usually a bank or employer) to withhold some type of property (usually money) to be delivered to a creditor;

  • A Levy:  The obtaining of money by legal process through seizure and sale of property;

  • An “Execution” or “Writ of Execution” to Collect or Enforce a Judgment on a Debt:  A court order granted to put in force a judgment of possession obtained by a plaintiff from a court.  Typically, a court will order a sheriff to take possession of property owned by a judgment debtor.

Q.  What actions are not prohibited under Senate Bill 20-211?

 A.  Any action that does NOT result in the seizure of a debtor’s assets (including money) on behalf of the Creditor, which would include:

  • Sending Demand Letters;

  • Filing Liens;

  • Filing County Court collection lawsuits;

  • Filing for Judgment for a County Court collection lawsuit;

  • Filing District Court Foreclosure Lawsuits; and

  • Entering into payment plans/stipulations with Owners.

Q.  What other collection actions may be prohibited by Senate Bill 20-211?

A.  It is unclear as to whether the following legal actions are restricted by this law at this time:

  • Appointment of a Receiver:  As the property is seized by a third-party (Receiver) and the rent from such property is delivered to the Creditor by the receiver, this may be prohibited by SB 20-211.

  • Judgments for a Decree of Foreclosure of Cases already in Court:  The Order for a Decree of Foreclosure specifically directs a third-party (the Sheriff) to sell an Owner’s property, and thus, may be prohibited by SB 20-211.

  • Sheriff’s Sales:  A sheriff sale is a process where a third-party (the Sheriff), sells the property at auction, and thus, may be prohibited by SB 20-211.

Q.  What must an HOA do to proceed with an Extraordinary Collection Action during the term of SB 20-211?

A.  The HOA must send a notice to the Owner advising them of their right to suspend the collection action in question if the debtor is facing financial hardship due to COVID-19.  Such notice must be sent within 10 – 60 days PRIOR to the expected date to proceed with the Extraordinary Collection Action.  If no response from the Owner is received by the expected date, the HOA can then proceed with the Extraordinary Collection Action.

Q.  What must an Owner do to exercise their right to suspend the legal action?

B. The Owner is required to notify the HOA of the financial hardship after receipt of the notice and prior to the expected date of the HOA proceeding with Extraordinary Collection Action (expected date should be included in Notice to provide the deadline).  The Owner is not required to provide proof of such financial hardship.  If such notification occurs, the HOA may not proceed with the Extraordinary Collection Action for the term of the bill, which shall terminate on November 1, 2020, or February 1, 2021 (if extended).”

Q.  If an Owner indicates they are financially impacted by COVID-19, does this affect the actual debt?

A.  SB 20-211 does NOT waive the Owner’s obligation to pay the debt, nor does it provide actual debt forgiveness.

Q.  How can an HOA proceed if an Owner indicates they have been financially impacted by COVID-19 under SB 20-221?

A.  SB 20-211 does not prohibit an HOA from:

  • Applying interest to the debt;

  • Applying late fees;

  • Proceeding with other collection attempts that do not involve the involuntary seizure of the Owner’s property; and

  • Entering into payment plans with the Owner; 

If you have questions regarding SB 20-211, contact us at info@westernlawgroup.com

THIS IS NOT LEGAL ADVICE.  FOR INFORMATIONAL PURPOSES ONLY.

Gabriel StefuWesternLaw Group LLC