When are arrears too high
By Bruce D. Woodrow
Sunday, July 21, 2002
Every member of every co-operative has an obligation to pay housing charges in full and on time each month. Most members do just that.
Unfortunately, some members get into arrears. Unless a co-operative has a procedure to deal with arrears before the amount owed by a member gets too high, the co-operative risks having to write off large amounts. Such a procedure is often in the form of an Arrears Policy or Arrears By-law, or may be part of a Finance By-law.
If a member does not contact the co-operative in advance to explain a problem, the Co-operative should issue a reminder about non-payment (or short payment) within a few days of the first of the month, levying a late payment charge if appropriate. Unless the member makes a satisfactory proposal (and honours it), the case should be referred to the arrears committee or board of directors for action. If a member is having financial problems, dealing with arrears that exceed one month’s housing charges can seem insurmountable.
In Toronto, some members can get help from the Here To Stay program operated by the CHFT Charitable Fund. However, it is restricted to arrears of 1 month or less.
The board of directors must make decisions in the best interests of the Co-operative. The board must recognize when a member has no reasonable prospect for getting out of arrears, or even staying current, and the member must leave the Co-operative. Sometimes this departure can be negotiated. Otherwise, it means an eviction.
An eviction can be harsh for the member, demoralizing for the board and difficult for the whole co-operative if there is an appeal to a general meeting. Legal costs can be quite high. Once a co-operative decides to evict, the member may stop paying altogether, so that the arrears increase substantially during the process of going to Court and then having the Sheriff carry out the eviction.
Sometimes arrears (and legal costs) can be collected after a member is evicted, but this is frequently not the case. The most common way of collecting is through garnishment of an employer. Most forms of social assistance cannot be garnisheed. If a member is not working, there is no employer. Even if an ex-member is working, there may be a family support order that takes precedence. It is often better to evict while the arrears are low rather than allow the arrears to increase in the hope that they can eventually be collected.
Members who get into arrears may have other financial problems. They may have fallen behind in loan payments or run up large credit card balances. A member who owes a substantial amount of money may declare bankruptcy. Not only will the Co-operative lose all or most of the arrears, but it will not be able to evict the member if he or she can come up with subsequent housing charge payments as they come due. This is because the co-operative cannot start or continue any legal action to collect the debts owing at the time of the bankruptcy. The co-operative can evict for subsequent arrears, but not if the member stays current.
Most boards try to be as flexible as possible when a member gets into financial trouble, which is a good thing. But if a member does not have a reasonable plan to deal with financial problems, the best interests of the co-operative may require prompt action.
