In an effort to assist residents facing severe hardship, the Massachusetts Attorney General issued new regulations on March 27, 2020 restricting consumer debt collections. The coronavirus pandemic and resultant economic fallout are bad enough; now the Commonwealth’s efforts to protect consumers and their homes have imposed an additional, unintended burden on condominium associations.
While the intention was noble, the regulations’ broad reach falls heavily on condominium associations, many of which are struggling with the unanticipated costs of dealing with the unprecedented challenges presented by the COVID-19 pandemic. As we turn a new month, and delinquencies increase and age, prudent cash-flow planning requires understanding these restrictions.
The new Unfair and Deceptive Debt Collection Practices During the State of Emergency Caused by COVID-19 regulations, which were immediately effective upon their announcement, are intended to protect consumers from unfair and deceptive practices by creditors and debt collectors. They will remain in place until June 25, 2020, or the end of the State of Emergency -- whichever comes first.
The regulations restrict condominium associations, property managers and their attorneys from taking action to collect outstanding condominium common area expense assessments. They also prohibit the initiation, filing or threatening to file of any new “collection lawsuit,” defined as“any legal proceeding, including…civil actions, statements of small claims and supplementary process actions, commenced in any court for the purpose of collecting any debt or other past due balance owed or alleged to be owed.” Further, the regulations do not allow a creditor or debt collector to “initiate, threaten to initiate, or act upon any legal or equitable remedy for the seizure [or] attachment…of…property…for the payment of a debt to a creditor.”
It is strongly recommended that no new complaint to collect unpaid condominium common expenses be filed while these emergency regulations are in place, and that any pending collection actions be put on hold. Condominium associations, property managers and their attorneys should also refrain from sending notices that threaten legal action for failure to pay any past due assessment. Although regular monthly invoices may continue to be sent, they should not contain any language that threatens action to collect any unpaid assessment.
Despite these regulations, there are still steps available to protect your association’s super lien rights. Property managers should continue to notify their attorneys of delinquent accounts, so we may evaluate what steps can be taken without violating the emergency regulations. For example, the regulations do not prohibit associations from working with a unit owner to come up with a mutually agreeable payment plan.
Additionally, since the regulations are intended to protect consumers (“debt” is defined to include money owed “for personal, family or household purposes”), they do not apply to commercial units. They also do not prohibit collection efforts for rental units, or units held as investment properties. While this means that associations can file lien enforcement actions for these units, the Condominium Statute also contains a rent-collection procedure -- long relegated to the sidelines by the effectiveness of lien enforcement notices and lawsuits -- which may prove effective in the current environment.
Efforts are being made by the New England Chapter of Community Associations Institute (CAI), the Massachusetts Real Estate Bar Association (REBA) and others to obtain an exemption for condominium associations. However, until such an exemption is obtained, or until the emergency regulations expire, compliance is required.
Sandy Moskowitz is a shareholder at Boston law firm Davis Malm. He is a real estate attorney focusing on condominium law, title issues, real estate litigation and development who routinely represents condominium associations throughout Massachusetts. Courtney Simmons is an associate at Davis Malm. She is a litigator, assisting clients in commercial litigation and real estate disputes. She advocates on behalf of clients involved in business, land use and zoning issues.