Q&A: Management has a duty to maintain careful custody of payments for HOA dues

Question: Our management company sometimes delays posting monthly dues payments by homeowners for two weeks. These “late” payments generate late charges to the owner’s account. The company also misplaces homeowners’ monthly payment checks, leading to more late charges.

Management has issued a notice of intent to put a lien on my property because of nonpayment of October and November dues. They also have added administrative and late fees even though my bank has records showing the funds were withdrawn and delivered to the property management company on time.

Management had refused to investigate the problem and repeated, “We did not receive them at our data processing company, and we will not check for you.” Finally, my bank arranged a conference call with management, and at that time, the manager said she found one of the missing checks. I asked whether she would reverse the fees associated with missing checks and withdraw the intent to lien. She refused, saying this was an issue for the board to decide. Then she hung up on me and the bank.

Are there any statutes stating that management or the board should have notified me earlier that they were not receiving my payments? Who is responsible for this type of serious incompetence?

Answer: There are no statutes that require management or the board to notify you if they have not received your payments, or to provide a grace period for late payments, although your governing documents may require otherwise. Each owner is responsible for ensuring that payments are delivered and received, but the board is responsible for ensuring management conducts itself according to acceptable business practices. A manager who refuses to investigate a complaint of a lost check is not following such practices.

Delaying application of owner monthly assessments possibly for the purpose of generating additional revenue for the management company or association is even more unacceptable. When an owner’s check or payment is received by the association, the accepted presumption is that management deposits it on receipt.

According to Civil Code section 5655(b), when payment is made to the association, any owner may request a receipt that includes the date of the payment and the name of the person who received it. Following this procedure by always demanding written confirmation of payment helps deal with a management company prone to misplacing checks. If delivering checks directly to management results in these kinds of problems, according to Civil Code section 5655, any owner can request a mailing address for overnight payment of assessments.

Although the burden to ensure delivery and acceptance of payments to the association falls on the owner, the board has a duty to oversee the actions of its vendors, including management. The board needs to immediately instruct management to correct its practices or find a new management company. Sloppy management, especially in regard to accounts receivable, is a liability for the association. Each owner who is improperly charged a fee as a result of management misconduct should demand reimbursement in writing from the board.

Regarding your notice of intent to lien, if the board does not take immediate action to retract it, demand that an Internal Dispute Resolution take place immediately, as provided for under Civil Code sections 5900 to 5920. That demand is required to be in writing.

There are several advantages to requesting such a method for resolving a dispute. First, the owner cannot be charged a fee to participate in the process. Second, the law requires a prompt meeting at a mutually convenient time and place. Third, a board director, not a surrogate, must be designated to meet and confer with you.

Such a face-to-face meeting will allow you to challenge the lien notice based on various failures of management and the board in handling your account. Share evidence that shows you paid the amounts for which you are still being billed. Finally, warn the board that if this is not resolved, you will be filing a small claims action against the association. Any judgment in your favor will set a precedent against this association and will be in the public record, to which potential buyers will have access.

Something like this should have been a priority for the board to resolve. The fact that it wasn’t should alert other owners that they could be next.

Zachary Levine, a partner at Wolk & Levine, a business and intellectual property law firm, co-wrote this column. Vanitzian is an arbitrator and mediator. Send questions to Donie Vanitzian, JD, P.O. Box 10490, Marina del Rey, CA 90295 or noexit@mindspring.com.