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By: Bill Buechner
The Eleventh Circuit recently held in a case of first impression that a property management company is not a “debt collector” under the Fair Debt Collection Practices Act (FDCPA).
In Harris v. Liberty Community Management, Inc., the property management company (Liberty) was designated in its contract with the homeowners association as the general agent for the HOA. Liberty performed a broad range of tasks for the HOA, including contracting for maintenance of the pool and other common areas, obtaining utilities, and performing a variety of accounting and banking functions. Liberty also collected on current and overdue assessments.
Due to the accumulation of more than $140,000 in unpaid assessments, the HOA adopted an amendment to its governing declarations, authorizing the HOA to suspend water service if the homeowner owed more than $750 in unpaid assessments and received adequate notice of the water suspension. The plaintiffs had their water service suspended by the HOA pursuant to this provision and filed a lawsuit challenging this action. The plaintiffs asserted that Liberty was a “debt collector” under the FDCPA and that its actions constituted an unfair debt collection practice. The plaintiffs also asserted that Liberty’s actions constituted an unfair trade practice under the Georgia Fair Business Practices Act (GFBPA).
Affirming the district court’s grant of summary judgment in favor of Liberty, the Eleventh Circuit noted that “not all who collect debts are ‘debt collectors’” under the FDCPA. The Eleventh Circuit concluded that Liberty fell within an exemption in the FDCPA for entities “collecting or attempting to collect any debt owed … to the extent such activity is incidental to a bona fide fiduciary duty.” The Court emphasized the numerous tasks that Liberty performed for the HOA other than debt collection, and that debt collection was only incidental to Liberty’s obligations to the HOA as its general agent.
As to the Georgia Fair Business Practices Act claim, the Court noted that the termination of water service for non-payment did not fall within the 34 specified practices identified in the statute as examples of unfair business practices. In rejecting Plaintiffs’ GFBPA claim, the Court stated that “a natural consequence of a person’s failure to pay for a service is that, at some point, the service provider may refuse to continue to provide that service.” In support of this statement, the Court cited a United States Supreme Court decision noting that, under common law, a utility is entitled to terminate service for nonpayment of an undisputed charge.
As a result of the Harris decision, property managers for HOAs, condominium associations and apartment complexes likely are exempt from the FDCPA, as long as they are performing a broad range of tasks for these entities as their general agent. Also, as a result of the Harris decision, suspending water service for nonpayment of assessments likely does not constitute an unfair trade practice under the GFBPA, as long as the homeowner receives adequate notice and the homeowner does not dispute the assessments owed.