Do Property Management Companies Need to Comply with Fair Debt Collection Practices Act?

Questions regarding compliance with the federal Fair Debt Collections Practices Act for the collection of community association assessments by property management companies have been a source of confusion in the industry for decades. Since the ruling in Harris v. Liberty Community Management, Inc., property management companies that fall within the exemption found in §1692a(6)(F)(i) of the FDCPA are not subject to the restrictions imposed by the Act.

The Act provides an exemption for persons or entities “collecting or attempting to collect any debt owed or due or asserted to be owed or due another to the extent such activity is incidental to a bona fide fiduciary obligation.” Liberty Community Management, as the property management company for Little Suwanee Point Community, was hired to provide management services for the association, which included the right to contract for the regular maintenance, repair and operation of common areas and facilities of the association, contract for utility services, purchase insurance policies, and negotiate the collection of assessments from delinquent homeowners.

Liberty, as the association’s agent pursuant to the management agreement, was also authorized to request, demand, collect, receive and invoice for all charges and assessments due to the association. Homeowners residing at Little Suwanee Point Community brought an action against Liberty claiming it was a debt collector which had engaged in unfair business practices when it sent late letters to homeowners who were delinquent in the payment of assessments.

After reviewing the facts presented and the exemptions set forth in the Act, the Eleventh Circuit held that Liberty was exempt from the requirements of the Act since the collection of past due assessments was incidental to its obligations to the association. Had the collection of assessments been central to Liberty’s fiduciary obligations to the association, it would be considered a debt collector as defined by the Act, subject to the requirements imposed therein.

Whether a property management company meets the requirements of the exemption is a question of fact for each individual case. If the collection of assessments is central to an association’s contract with its property management company, the company’s actions to collect the debt will fall within the meaning of term “debt collector” as defined by the Act, making it subject to the requirements imposed therein.

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