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Post by leokeeler on Nov 29, 2015 20:02:26 GMT
NOTE: Changes in the Declaration language are denoted with BOLD italics (new language) and strikethrough (removed language.)
GovDocCmte Notes: This section received a lot of feedback in the 2014 survey and in Board meetings requesting the changes to the interest rate, the way it is computed and the penalty.
Lawyers’ input: The current, relatively high interest rate and the compounding of interest could be considered usurious and may not be upheld in court. The Association should change it if we intend to pursue collection of past dues in court.
11.06. Effect of Nonpayment of Assessment. If any assessment is not paid by midnight on the date when due, then such assessment shall become delinquent and shall, together with any interest thereon, become a continuing lien on the parcel which shall run with the land, if the assessment remains unpaid for thirty (30) days after such due date, a five percent (5%) penalty will accrue on the amount of the payment due and the assessment shall thereafter bear interest from the due date at the rate of one and one half percent (1-1/2%) per month, compounded monthly set by the Prime Rate as posted in the Wall Street Journal or its successor as of December 1st of the year preceding the next assessment year plus three percent (3%) per year, simple interest. The obligation to pay any assessment, penalty or interest of the current Landowner of any property in the Community subject to assessment shall not be affected by any conveyance or transfer of title to said parcel unless waived or agreed upon in writing by the Association. The Association may bring an action at law against a Landowner to collect delinquent assessments, penalties and interest and/or to foreclose on the lien against the parcel, and there shall be added to the amount of such assessment the cost of collecting the same or foreclosing the lien thereof, including reasonable attorney’s fees.
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Post by leokeeler on Nov 29, 2015 20:04:36 GMT
I fear the simple change in wording here creates the possibility that current past due debts to GLA may be reduced from nearly $270,000 to $81,000 through the change in interest from being calculated at 18% simple interest to 6%. Keep in mind many of the debtors have a long history of non-payment and that has impacted all Landowners
The attorney review says the current rate of 18% is a "relatively high interest rate", and continues to say the compounding of interest could be considered usurious and may not be held up in court." (emphasis added)
I consider the proposed prime plus 3% as an extremely low interest rate of 6.25%. Current credit cards run from 8.99 to over 20%, car loans are 8% and personal unsecured loans are as low as 6.9%.
No effort from this attorney, or the Board, has been made to show or offer alternative rates nor to describe if GLA is to become a personal loan agency or if we should keep the interest rate high enough to encouraging paying GLA vs paying a credit card.
I hope to hear/see discussion on dealing with current debts vs having a deterrent for future non-payment.
My feelings are to set the interest rate at 10% + prime to act as incentive to stay current.
I realize the Board is looking at establishing a policy for collecting late payments, which will likely include foreclosure. Some Board members have voiced they would never consider foreclosure, which shows this will be a sensitive discussion with many options and worthy of in depth analysis, not just a simple, unjustified proposal from the Board.
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Post by leokeeler on Feb 1, 2016 20:26:33 GMT
Here is an alternative recommended change to 11.06 that does not give away $ 186,000
Why I recommend this change: The current compounding of 1.5% interest equals an annual percentage rate (APR) of 18%. This interest rate is a penalty rate, not a loan rate as Prime (3%) plus 3% (total 6% APR) would be considered. By reducing the interest due amount of delinquent amounts to Prime Plus 3% and making it retroactive, as may be done unless clearly prevented, the current approximate amount of $280,000.00 in collectable past due assessments would be reduced to only $93,333.00
The interest rate of 18% has been used in establishing late payment plans, and, thus, is collectible.
Should there be a desire to assure the interest rate is collectible under State law; it can be tied directly to State law at 31-1-107 which reads
”(1) Parties may agree in writing to the payment of any rate of interest that does not exceed the greater of 15% or an amount that is 6 percentage points per year above the prime rate published by the federal reserve system in its statistical release H.15 Selected Interest Rates for bank prime loans dated 3 business days prior to the execution of the agreement. Interest must be allowed according to the terms of the agreement.
(2) A loan that is not usurious when made, is lawful for the duration of the loan, provided the loan agreement is not substantially changed. This subsection does not apply to loan renewals.
(3) The provisions of this section do not apply to regulated lenders as defined in 31-1-111”
Making major changes to the Covenants, Bylaws not included, may be considered a substantial change to the agreement (Covenants) Members have made with each other. A loan collection expert should advise on this.
Note: Text currently recommended by the Governing Doc Committee is in bold and strikethrough my recommended new language is in simple bold text, and what I'd delete, including the Gov. Doc Committee recommendation is in strikethkrough
11.06. Effect of Nonpayment of Assessment. If any assessment is not paid by midnight on the date when due, then such assessment shall become delinquent and shall, together with any interest thereon, become a continuing lien on the parcel which shall run with the land. If the assessment remains unpaid for thirty (30) days after such due date, a five percent (5%) penalty will accrue on the amount of the payment due and the assessment shall thereafter bear interest from the due date at the maximum rate described in State law 31-1-107 Interest rate allowed by agreement, which is 15% in the year 2016. of one and one half percent (1-1/2%) per month, compounded monthly set by the Prime Rate as posted in the Wall Street Journal or its successor as of December 1st of the year preceding the next assessment year plus three percent (3%) per year, simple interest. The obligation to pay any assessment, penalty, or interest of the current Landowner of any property in the Community subject to assessment shall not be affected by any conveyance or transfer of title to said parcel unless waived or agreed upon in writing as approved by a vote of the Members of by the Association. The Board of Directors, acting for the Association may bring an action at law against a Landowner to collect delinquent assessments, penalties and interest and/or to foreclose on the lien against the parcel, and there shall be added to the amount of such assessment the cost of collecting the same or foreclosing the lien thereof, including reasonable attorney’s fees.
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