|
Post by leokeeler on Nov 28, 2015 12:55:57 GMT -7
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.
|
|
|
Post by leokeeler on Nov 28, 2015 13:51:49 GMT -7
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 forclosure, 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.
|
|
|
Post by leokeeler on Jan 31, 2016 20:14:54 GMT -7
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.
|
|
|
Post by Concerned on Feb 12, 2016 20:42:17 GMT -7
Thank you Leo for providing a greater understanding of the repercussions of the proposed changes in the governing docs. It seems like we should all be concerned, more power is being given to 12 people through these document changes while the rest of the landowners are left with less power?
|
|
|
Post by leokeeler on Mar 7, 2016 11:11:45 GMT -7
How late assessments are handled is a major concern for Landowners and has arisen in numerous Board and Committee meetings. Though late assessments become a lien on the land some fear it may never be collected. Landowners have become very concerned about the obvious objective the Board has to reduce the interest rate to the lowest rate possible and the statement made by Dan Kehoe to make those low rates “retroactive.”
An 8 page letter has been sent to a collections attorney without any Landowner involvement and apparently without any meetings of the Legal Committee (per Kehoe statement on February 20th). Why have Landowners not been allowed to see and comment on a proposal with this magnitude of potential impacts, and will Landowners be approving it or will the Board simply apply it until challenged?
Members of the Board have often referred to “The Big Sky Covenants” as a good example of how to collect fees and address other covenant violations. Some like Big Sky’s covenants so much they have suggested developing a set of covenants similar to Big Sky and dropping our existing Covenants.
Mr. Aza Ziegler recently made full payment of his late assessments, including paying the 18% simple interest. Should the Board enter into any new Payment Plan Contracts that freeze the interest rate, it will harm Mr. Ziegler, be an act of favoritism and show open disregard of fiduciary responsibilities.
Other landowners entering into Payment Plan Contracts in the past have accepted the 18% simple interest rate applied to their overdue assessments. Mr. Ziegler's payment and past deals with some landowners creates a major concern the Board must address while processing any change to our covenant 11.06
Below is the covenant on Nonpayment in both the Sweetgrass Hills, and Meadow Village subdivisions in Big Sky. They both ask for the maximum allowed by law and require the interest rate be applied “until paid.”
6 ASSESSMENTS
F. Effect of Nonpayment of Assessments and/or Fines: Remedies of the Association. Any assessment or fine not paid within sixty (60) days after the due date shall be delinquent, shall incur a late payment penalty in and amount to be set by the board from time to time, not to exceed the maximum permitted by applicable law, and shall bear interest at a rate established by the Board which shall not exceed the maximum interest rate authorized by law until paid. Failure to pay within sixty (60) days of the due date will result in the Association recording a lien against the property being assessed or bringing an action at law or both. Suit to recover a money judgment for unpaid assessments, fines, late charges, interest and attorney’s fees shall be maintainable without foreclosing or waiving the lien securing the same.
The Association may record that lien with the office of the Clerk and Recorder, Gallatin County, Montana, or bring an action at law to collect the lien or foreclose the lien against the real property in the same manner as a mortgage on real property, and the Association shall be entitled in any such actions or foreclosure proceedings to recover its costs, expenses and reasonable attorneys’ fees. The Association, acting on behalf of the Owners, shall have the power to bid for the Unit, Lot, or Tract at foreclosure sale, and to acquire and hold, lease, mortgage and convey he same. During the period a Unit, Lot or Tract is owned by the Association following foreclosure, no right o vote shall be exercised on behalf of the Unit, Lot or Tract and no assessment shall be assessed or levied on the Unit, Lot, or Tract. The Board may authorize the executions and recordation of a deed conveying title to the Unit, Lot, or Tract wich deed shall be binding upon the Owners, their successors, and all other parties.
|
|