Collecting Rent from Delinquent Members' Tenants

Collecting Rent from Delinquent Members' Tenants

Q: Some of the economically distressed members in the community I manage have decided to lease their homes to tenants to help cover their expenses. At the same time, the landlord-members seem to have made paying assessments a low priority and may have become delinquent. Can an association collect rent directly from a tenant to pay any delinquent assessments? If so, what is the best way to do this?

A: First, check the governing documents for additional collection powers. Standard collection powers in typical governing documents allow an association to impose late fees, apply interest to outstanding balances, impose liens for past-due assessments, and grant the association power to foreclose on the association liens.

Many community association documents will allow for further collection powers such as suspension of use and services. An association may suspend a delinquent member's right to vote, to use a recreational facility, or to use some services paid for as a common expense, such as Internet or cable.

One special collection power is the assignment of rent to the association. Rent assignments allow an association to demand that a tenant of a delinquent owner submit all monthly rental payments to the association until the member's delinquency is paid in full. Without this clause or some other language in the governing documents allowing for a “rent assignment,” an association would have to go through a court procedure and basically sue the member, get a judgment, and obtain a court order to collect the rent from the tenant.

Your association can pursue only those collection remedies that are permitted under your governing documents. If your documents do not contain a provision for an assignment of rent, you can amend your governing documents to include one that allows for this specific collection power.

Your second move should be to add an assignment of rent clause to the lease addendum. Some governing documents say that if a member is leasing his home, the member has to include a clause in the lease that states that the tenant has to abide by the governing documents. And the tenant will sign that he has received a copy of the governing documents. This, in effect, will put the tenant on notice of the assignment of rent provision.

A clearer way to put the tenant on notice is to not only amend the governing documents, but also require a lease addendum to the lease between the member and his tenant that includes this assignment. The lease addendum creates a contractual relationship among the member, the tenant, and the association that is helpful in the event assessment payments from the owner fall behind schedule.