Question: The board of directors of a homeowners association would like to address whether to hire a collection company to recover past-due maintenance fees; it would be similar to the ones used by commercial companies to notify delinquent owners and report them to the credit bureau if they do not pay attention to their calls and letters.
The board does not want to address the collection of fees following the association's attorney procedures. Is that process recommended for home owners' association?
- Josh B.
Answer: If you use a collection agency, you will need to pay a fee that will reduce the funds collected. Your documents should allow the use of lien and foreclosure actions and any legal costs to be recovered. This is one of the most powerful tools allowed by law.
You can take the home away from the owners by foreclosing on the lien. Homestead exemption is not a protection by this power. Why would you want to just cause a blemish on their credit record when you can force payment by foreclosure?
Collection agents are expensive and do not have that power that you have.
Use your attorney for collections. Have him or her file a lien and foreclosure. Any legal costs will be added to the amount owed by the owner.
The message is strong and after you enforce your collections powers, most owners will begin paying on time.
Question: Bob, I have enjoyed reading your columns for many years and the several articles on exchanges. Now it is actually happening to me. The sale of my eight-unit apartment building is now pending. It should close next month. My net profit will be about $97,000-$98,000.
Am I correct, I have two years to reinvest this money in another apartment building so I can defer my profit tax? Please answer this by last of April
- Tom R.
Answer: Tom, keep reading ... I hope this is soon enough, had 13 e-mails, etc., before yours.
No. You are thinking of Internal Revenue Code 1034, the "rollover residence replacement rule," which only applies to sales of principal residences.
If you were selling your home, you would have two years to buy a replacement principal residence of equal or greater cost to defer your profit tax.
However, the only way to defer profit tax on the sale of investment property, such as your apartments, is to make an Internal Revenue Code 1031 tax deferred exchange. Since your sale has not yet closed, if you consult your tax advisor or attorney now, you can probably convert this into an IRC 1031(a) (3) Starker delayed tax-de- deferred exchange.
To qualify, your sales proceeds must be held beyond your constructive receipt by a third-party intermediary, such as a bank trust department. Then you have 45days from the date of sale to designate the "like kind" investment property you will be acquiring and 180 days to complete the tax-deferred Starker delayed exchange.
Have a real estate question? Write, call, fax or e-mail:
Bob Jeffries, Realtor,
Century 21 Birchwood Realty, Inc.
4040 Del Prado Blvd., Cape Coral, FL