Community Association Collections and the FDCPA

After initial opinions finding that the Fair Debt Collections Practices Act did not apply to collection of Community Association Assessments, the Courts reversed their position in those initial opinions and have expressed a strong and generally accepted position that homeowners and unit owners are protected by the FDCPA in efforts to collect unpaid assessments.

In NEWMAN v. BOEHM, PEARLSTEIN, & BRIGHT, LIMITED, 119 F.3d 477 (7th Cir. 1997), the court stated the issue up for its consideration as follows: “The question presented by these appeals…is whether an assessment owed to a homeowners or condominium association qualifies as a ‘debt’ under the Fair Debt Collections Practices Act…”

In NEWMAN the Court discussed the lower court’s finding that community association assessments did not meet the definition of “debt” under the FDCPA.  The lower court based its ruling on the fact that the definition of debt under the FDCPA had been interpreted to require an, “offer or extension of credit to a consumer”.  See RITER v. MOSS & BLOOMBERG, LTD., 932 F.Supp. 210 (N.D.Ill. 1996) and ZIMMERMAN v. HBO AFFILIATE GROUP, 834 F.2d 1163 (3d Cir. 1987).  The NEWMAN Court noted that between the lower court ruling and its consideration of the current appeal the 7th Circuit in BASS v. STOLPER, KORITZINSKY, BREWSTER & NEIDER, S.C., 111 F.3d 1322 (7th Cir. 1997), rejected the credit requirement under the definition of “debt” in the Act.  “All that is required…is a transaction creating an obligation to pay.”  Id.

The NEWMAN Court went on to note that all Federal Court decisions finding that an association assessment is not a “debt” under the Act relied on the reasoning in ZIMMERMAN.  And, concluding that all said decisions are now rejected allowing the NEWMAN Court to, “write on a clean slate”.

The NEWMAN Court considers whether the requirement of a transaction establishing the debt, and whether the debt incurred was primarily for personal, family, or household purposes is met under the circumstances of association assessments.  The Court reasons that, “[b]y paying the purchase price and accepting title to their home, the [Owners] became bound by the Declaration…, which required the payment of regular and special assessments imposed by the association.  The purchase of the home or unit constitutes the transaction whereby the Consumer voluntarily takes upon themselves the debt obligation, which is payment of assessments as imposed by the Association.  Further, because the subject of the transaction is the purchase of a family home, the court concludes that, “there can be little doubt that the subject of those ‘transactions’ had a personal, family, or household purpose”.  But, beyond consideration of the nature of the “transaction”, which is the purchase of the home, the Court finds that the assessments themselves meet the requirement of being for personal, family, or household purposes, because they directly benefit the household through such activities as repair of common roofs, or maintenance of common walkways, yards, or landscaping.  NEWMAN, 119 F.3d 477.

The Tenth Circuit specifically cited the NEWMAN Court’s reasoning in reachin the same conclusion in LADICK v. VAN GEMERT, 146 F.3d 1205 (10th Cir. 1998).  See Also SNOW v. RIDDLE, 143 F.3d 1350 (10th Cir. 1998).  “The assessment at issue in this case therefore qualifies as an ‘obligation of a consumer to pay money arising out of a transaction'”.  LADICK. Citing 15 U.S.C. Sec. 1692a(5).

The Middle District of Florida addressed this issue in FULLER v. BECKER & POLIAKOFF, P.A., 192 F.Supp.2d 1361 (M.D. Fla. 2002).  The Collector argued for the Court to follow the Northern District of Florida’s decision in AZAR v. HAYTER (citiation omitted in FULLER), which relied on the previously overruled decision in ZIMMERMAN v. HBO AFFILIATE GROUP, 834 F.2d 1163 (3d Cir. 1987), in finding that an assessment is not a debt.  The Court in FULLER notes, “…Defendants urge this Court to accept the reasoning that maintenance assessments are not debts. However, Defendants fail to acknowledge that…in subsequent decisions the Eleventh Circuit expressly rejected the notion that a debt under the FDCPA must involve an extension of credit”.  See BROWN v. BUDGET RENT-A-CAR, 119 F.3d at 924.

The FULLER Court goes on to rely on the reasoning in the line of cases from the Seventh Circuit discussed above in finding that, “the maintenance assessments that the Association sought to collect…are debts subject to the FDCPA.

The generally accepted principal, based on the NEWMAN and BASS line of cases, is now that community association regular and special assessments are debts, the collection of which is subject to the FDCPA.  The attorney or collector seeking to collect these past due assessments must ensure its compliance with the FDCPA to avoid liability for damages pursuant to the Act.

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