Tuesday, July 16, 2013

Voluntary Payments

In the past, a community charged an initiation or capital contribution fee each time a home was sold.  A newly appointed Board of Directors discovers that this charge was not specifically authorized in the governing documents, and decides to end the practice.  Perhaps tens or hundreds of thousands of dollars were collected through the years.  Although the Board may wish to refund the homeowners, the reality is that the money has already been spent addressing critical maintenance issues.

The question arises:  Is there some type of statute of limitations on how far back reimbursements would have to be provided?  A quick call to the Association’s legal counsel reveals that no money will have to be refunded, due to something known as the “voluntary payment doctrine”.

This legal defense states that a payment voluntarily made cannot be recovered by claiming there never was an obligation to make the payment in the first place.  While controversial, and treated very differently in other parts of the U.S. (it is actually banned in Florida), in Georgia it has been codified as a defense to repayment.  The Georgia state statute (section 13-1-13) says “Payments of claims made through ignorance of the law or where all the facts are known and there is no misplaced confidence and no artifice, deception, or fraudulent practice used by the other party are deemed voluntary and cannot be recovered unless made under an urgent and immediate necessity therefore or to release person or property from detention or to prevent an immediate seizure of person or property. Filing a protest at the time of payment does not change the rule prescribed in this Code section.”

If your Association finds itself in a similar situation, be sure to consult legal counsel to determine if this defense may apply to you.

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