Peter S. Philbin, Esq.
Dear Mr. Philbin:
This is in response to your request for an opinion concerning whether assessments that your community association clients charge association residents are "debts" for purposes of the Fair Debt Collection Practices Act ("FDCPA" or "Act").
The FDCPA defines "debt" as
The community association assessments clearly are consumer obligations to pay money for services that are primarily for personal, family, or household purposes. The central issue, however, is whether these obligations arise out of a "transaction," as required by the Act.
Based on the letter from your colleague, Raymond J. Diaz, and the two telephone conversations I had with you and John R. Spring, Jr., it is my understanding that the community association assessments are included in covenants recorded against the property in the local land records. Before settling, those who plan to buy property in the community often receive a disclosure packet from the community association informing them of the covenants that apply to the property, including the covenant requiring them to pay community association assessments. Purchasers who either do not receive a disclosure packet or receive a packet but fail to read the portion concerning the community association assessments are nevertheless bound by the covenant; they are presumed to be on constructive notice of all recorded covenants.
Purchasers, on the other hand, sign no documents in which they agree to pay the assessments. Instead, they tacitly "agree" to pay them when they pay the purchase price and accept title to the property. Purchasers pay the purchase price and accept title during settlement, an event that clearly constitutes a transaction. Thus, we believe that the agreement to pay the assessment -- the obligation to pay money -- "aris[es] out of a transaction in which the . . . services that are the subject of the transaction are primarily for personal, family, or household purposes." Accordingly, it is the opinion of the Commission staff that your clients' community association assessments constitute "debts" for purposes of the Fair Debt Collection Practices Act.
The views expressed herein represent an informal staff opinion. As such, they are not binding on the Commission. They do, however, reflect the staff's current enforcement position.
Thomas E. Kane