Attorney Fees for Collection
Raymond Harrison Esq. was a condo homeowner and president of his Condo Association in the late 1980s when he first became aware of issues related to non-payment of condo fees by some condo owners. He was also an attorney collecting delinquent condo fees for many Condominium Associations throughout Rhode Island. Non-payment of condo fees was a major concern that caused financial problems for many Condo Associations. Warning letters and payment plans did not work for condo owners who abandoned units or who stayed and never paid condo fees. Condo Associations needed to hire knowledgeable attorneys to collect delinquent condo fees. Ray had been reading the Rhode Island condominium law on a daily basis since 1985 and knew that the state law was not working for us on the important issue of attorney fees for collection.
Rhode Island Condo Law was Not Working for Us
The Rhode Island Condominium Association Lien Law was, and continues to be, a powerful right provided by the state to help executive boards pay the bills necessary to operate our condo associations. Condo units are subject to the state Condo Association lien, giving associations a security interest in condo units to enforce the obligation of unit owners to pay condo fees. The original state Condominium Association Lien Law described that the lien included delinquent condo fees but did not clearly reference and include attorney fees and costs incurred by the association in the collection of delinquent condo fees. Some but not all condominium documents stated that delinquent unit owners had to pay attorney fees and costs incurred in the collection of delinquent condo fees. Ray remembers attorneys for delinquent unit owners arguing that their clients had no obligation under state law to pay attorney fees incurred by associations in collection.
Payment of Costs of Collection
Executive boards were faced with the need to pay attorney fees and costs to collect delinquent condo fees causing dilemmas for board members. Most executive boards had created association budgets with little or no annual funding for attorney fees and costs necessary to collect delinquent condo fees. In the late 1980s, there were many new condo associations facing financial problems because most developers had advertised unreasonably low condo fees and left unit-owner-controlled associations with little or no money in their association financial accounts. It was difficult for executive boards to balance association budgets while dealing with the financial hardship caused by condo fee delinquencies. Without a good state law to help executive boards recover attorney fees and costs incurred in collection, long-term delinquencies had a damaging effect on association finances. It was common for associations to lose thousands of dollars because executive boards were reluctant to pay for attorney fees and costs that may not have been recovered.
Lack of Clarity in the Rhode Island Condo Law
The original version of the Rhode Island Condominium Association Lien Law, RIGL 34–36.1–3.16(a), stated that the lien included “fees.” Ray remembers collecting delinquent condo fees for a Condominium Association, and the delinquent unit owner’s attorney, Mr. Smith, argued that his client had no obligation to pay attorney fees and costs incurred in the collection. The condo developer’s declaration and bylaws omitted language stating that the association’s collection attorney fees and costs must be paid by the delinquent unit owner. The R.I. condo law is based on the Uniform Condominium Act, which was created by the Uniform Law Commission in Chicago, Illinois. Ray spoke with a senior attorney at the Uniform Law Commission and was told that the term “fees” in RIGL 34–36.1–3.16(a) included attorney fees incurred in collection. To help resolve the dispute, Ray provided attorney Smith with the name and phone number of the senior attorney at the Uniform Law Commission. Attorney Smith wasn’t open to this attempt to resolve the dispute and continued to point to the lack of clarity in RIGL 34–36.1–3.16(a). Attorney Smith also argued that attorney fees and costs were an association business expense that should be paid by all of the condo unit owners. It didn’t seem reasonable to Ray that all of the unit owners, including those who faithfully paid condo fees, should have to pay for legal work to enforce the obligations of unit owners who wouldn’t pay their fair share of association expenses.
Making the Rhode Island Condo Law Work for Us
Raymond Harrison Esq. wrote legislation and worked to create the state law that clearly and expressly included attorney fees and costs in the state Condominium Association Lien. This unpaid condominium association advocacy by Ray at our Rhode Island State House occurred in the early 1990s. The improved Condo Association Lien Law replaced the word “fees” with “attorney’s fees” in RIGL 34–36.1–3.16(a). To decrease association expenses and save money for the responsible unit owners who pay their condo fees every month on time, Ray wrote the following language, which is still in RIGL 34–36.1–3.16(i): The association may take action for failure of a unit owner to pay any assessments or other charges pursuant to this section. The delinquent unit owner shall be obligated to pay all expenses of the executive board, including reasonable attorney’s fees incurred in the collection of the delinquent assessment or other charges by legal proceedings or otherwise, such attorney’s fees and other charges also being a lien on the unit.
Saving Money for Responsible Unit Owners
Attorney Smith’s client had owed more than 12 months of delinquent condo fees before the state law was changed to save money for responsible unit owners. Attorney Smith’s client’s condo fee delinquency continued to increase after the General Assembly enacted the law to include attorney fees and costs in the association lien. Ray informed the Condo Association executive board and property manager that he would go back into action to collect delinquent condo fees from attorney Smith’s client who was an investor collecting rent from a tenant in the unit while not paying the condo fees. Ray told attorney Smith about the changes to the state Condo Association Lien Law and sent him a copy of it. There could be no dispute at that point, and Ray collected all delinquent condo fees, late fees, and attorney fees and costs from attorney Smith’s client, which helped the association with some pressing financial needs. When irresponsible unit owners try to get away without paying condo fees, the result is that the responsible unit owners have to pay higher condo fees to make up the difference.
Once again, we thank former State Representative Rene Menard of District 45 who introduced and worked successfully to pass this legislation for the benefit of all executive boards, property managers, and responsible unit owners in our state.
