Did You Know......PAP Forms, Not Just Any Form Will Do

Pre-authorized Payment Form for the Collection of Common Expenses - Not Just Any Form Will Do.

The most efficient and effective way of collecting common expense payments from unit owners is through a pre-authorized payment plan (PAP). Many unit owners will gladly sign a PAP form in order to have their common expenses automatically withdrawn from their bank account monthly. However, the terms of the PAP form can greatly impact the rights of the corporation to collect amounts which are rightfully owed to them. Not paying attention to the terms used in the PAP agreement can result in the corporation losing a great deal of money.

The terms and wording for standard PAP forms vary greatly and unfortunately, neither the condominium corporation nor the unit owner pay much attention to the specific terms of the form. However, special attention must be taken to the terms used in the form. Although PAP forms may seem harmless and simple, more attention must be given to the specific provisions in them.

Several factors such as NSF payments, withdrawing special assessment payments, and cancellation of the PAP agreement by either party, must be considered when drafting a PAP agreement with unit owners. Furthermore, failure to pay attention to the wording of the PAP agreement may also result in invalid registration of liens by the corporation and other confusion relating to the accounting for common expense arrears. In fact, there are many problems with the PAP forms that it would be impossible to mention them in this short article. Two examples, however, are: 1) that PAP forms should have a clause which prevents them from conflicting with the corporation’s by-laws; and 2) that all PAPs must deal with the issue of how and when each withdrawn payment is to be applied. The importance of such a provision is unfortunately almost always ignored. The best practice is to always have the original PAP approved by the corporation’s auditor and lawyer.