Collections primer

If you have ever been owed money, and you were a reasonable businessperson, you know that you would never hire a $300-$600 per hour attorney to collect just $1800 in debt unless you wanted to completely harass and intimidate the debtor and by law you were entitled to recover attorney fees if you won [and you had a lot of cash in your pocket to waste on attorney fees]. This occurs only in the HOA world, not in the real world. It wastes time, it wastes money and it makes lots of enemies – not good for a close knit “community.”


But what if you don’t win? Who pays the attorney fee then? The HOA does. All the HOA members share in the loss TWICE. Why twice? You paid the HOA attorneys to sue, and now you have to pay the winning [prevailing] party’s attorney fees too! Some HOAs have been hit with $500,000 in attorney fees by listening to some attorney who eventually lost the case. Law is complex but in most cases the ONLY winning parties are the attorneys. Ask anyone who has been in litigation and they is what they will tell you. It’s no coincidence there are so many attorney jokes.


Think about this – what person would ever hire an attorney to sue for this itty bitty amount of money? Credit card companies don’t even sue for that much. We have all heard of ambulance chaser attorneys. Effectively we have the same thing going on here with these HOA collection attorneys; it’s the new ambulance chaser.


This is generally about an amount of money, $1800, less than costs to buy a good set of patio furniture today. Even a set of tires for your car could cost that much.


Ambulance chaser attorneys take personal injury cases on because they are practically 100% certain they will be paid, and paid well. When money is collected it goes into the attorney trust fund and they have complete control over the money. The take the cases on contingency, but not until they have met in the back room and done their due diligence to see if you will get paid.




This ad is from the front page of


“The procedure for turning over a delinquent account to S.B.S. is actually as simple as filling out a few forms, sending them into us and we will handle the rest and there is NO DEPOSIT REQUIRED TO START THE COLLECTION PROCESS. All fees and costs incurred by S.B.S. are based on our set fee schedule and are billed directly to the homeowner. Fees and costs will only be invoiced to the HOA if the result of the collection action is a senior lender foreclosure or the HOA completes their foreclosure action.” [or if they lose in a legal battle and the owner is prevailing party]


Guaranteed; if you were hit broadside, in a crosswalk, by a drunk 18 yo guy [or illegal] driving a car with no insurance, living in an apartment with roommates, working at McDonalds, you would not find an attorney on planet earth to take your case. It would not matter if you legs were severed, you lost an eye, and your face was smushed.  On the other-hand, if the 18 yo had $1,000,0000 insurance, lived at home with his folks, driving their Mercedes, and lived on the cliffs of Corona Del Mar… you have to beat the attorneys off your doorstep. The first thing my attorneys ask is every time: do they have insurance or own real estate. Remember this – attorneys do not takes cases where they will not get paid. This is why they love the HOA collection cases – they can be assured they will get paid from the sale of your home and they can spend $60,000 in fees taking you to court for $3,000 in debt and unpaid assessments. The new ambulance chaser.


I had an epiphany recently – I highly doubt if these collection attorneys are used much in “rich” HOAs like Big Canyon, or the Vintage, or Shady Canyon. Why? Because there are owners in those associations that have big bucks and bigger badder attorneys and when the dust settles, the HOA may have to pay both sides of a very expensive legal battle that could be more than $500,000 just in attorney fees. It’s just the opposite in an entry level HOA. At the Huntington Continental it’s more like theft. Most people in this association, if late on their HOA assessments, have NO money for an attorney.  It’s easy money for any attorney who is selected by a Board to work in these HOAs…. every month it’s like taking money from defenseless person. A guy points a gun in your face and says “give me your money” what do you do?


$1800 is the current threshold amount the legislature has set to “allow” foreclosure on a property to collect this unpaid debt. A HOA owners advocate group tried to raise the amount to $3600 but the HOA collection attorneys were able to stop it in the legislature.  The laws that govern this collection recommend simply using small claims court to obtain a judgment and for HOAs to collect their money that way. The best thing for the HOA is to get the debtor paying again and get their assessments, not to punish the debtor and put them in the poor house by allowing the un-fed attorney at the equity in their house.


Over the past few years attorney firms have been hard at work to weasel-in to the HOA Boards and “recommend” foreclosure. What they fail to tell you in their articles is this… every dollar collected FIRST goes to pay the attorney and if the home is sold and there is not enough money, the HOA pays the attorney out of HOA funds!!! While these are complex issues, the way the attorneys have set it up is that the attorneys get a lot of money, lots and lots of money, the association gets a little bit of money. That is the case at the Huntington Continental. No one in this Galaxy would spend $60,000 attorney fees to collect $3,000 debt. Not unless that $3,000 debt came with a nice condo at the Huntington Continental; your home!


The HOA collections is similar to this. Now, with the JM Trust case, using an attorney does not make sense; as far as the attorney is concerned. Here is why…. if the foreclosure can be stopped by the owner paying the assessments owed, and not the attorney fees, what happens? If the attorney can not foreclose and SELL your home to collect the fees the HOA will need to pay the attorney fees, and the HOA is never going to start doing that… right? So that just puts those collection attorneys right out of business. It no mystery why they are now fighting this decision.


When attorneys were assured of payment though the foreclosure of your home, they were lining up to take these cases hoping you would fight and they would make big paychecks. You can read Feldsott’s comment about making $60,000 on a $3,000 collection. That did not benefit the HOA one bit. It put some family out on the street and bought Feldsott a new Mercedes and that is criminal in my opinion. Like the old saying goes, you can steal more with a pen, than you can with a gun. The new saying should be you can steal more with a law degree than you can with a pen or a gun.


Here is a collection attorney’s overview of her thoughts on the JM Trust case. You can read between the lines.


In the world that benefits both parties, and where most cases could be worked out, you might just sue in small claims.


Small claims lawsuit filing fee: $50
Process server fee: $75
Total cost to obtain judgment on person: $125
Obtain abstract of judgment: $35
Record abstract with County: $35


Total cost: $320


Then if debtor did not pay within 6 months or 12 months, you “could” hire a collection attorney to force sale of property. Most likely most debtors would pay the debt by then. This is nothing like regular collections. You know where the debtor lives, you know they own real estate, they can not sell the real estate without paying you. No need for a collection attorney.


More to come.