July 16, 2010

In this week's tip, we give you the skinny on when it's wise and not-so-wise to go after delinquent homeowners in small claims court. Many attorneys recommend against it, but there are exceptions.

"In certain circumstances, small claims is a very viable option, such as when it's a small amount of money," says Robert M. DeNichilo, an attorney at DeNichilo & Lindsley LLP in Irvine, Calif., who specializes in representing community associations.

"It can be very quick to get a judgment. In the one case we did in small claims court, we got a judgment in three months compared to the foreclosure process. You still have to collect that judgment, but your cost of getting a judgment is so much cheaper."

The drawbacks? "You can't use an attorney, and there's a limit of $5,000 that you can collect, and that includes attorneys fees," says Sharon Glenn Pratt, a principal at Pratt & Associates in Campbell, Calif., who advises many homeowners associations. "There also aren't strict rules of evidence, and small claims court is really unpredictable. So I think you're better off using superior court."

Another drawback is you also can't appeal small claims court decisions in California. "I've had several clients go through small claims court, and I've heard of commissioners granting zero," says DeNichilo. "You can't appeal that; other owners hear about the decision, and then the rumor is that you can't collect your assessments... You have that risk."

For more information on the benefits and drawbacks of using small claims court to collect unpaid assessments in California and other states, see our new article: Can You Use Small Claims Court to Collect Unpaid HOA Fees?

Best regards,
Matt Humphrey
President