Monday, June 4, 2012

Collecting Unpaid Golf Club Dues



Today was a slow news day in the world of golf law, particularly after the fireworks at the Piedmont Driving Club over the past few days. It's pretty tough to top naked golf and mooning a rehearsal dinner. The other headline I contemplated for today was, "Deal Golf Club Halfway House to Serve Breakfast Sandwiches," which for me was undoubtedly the top announcement of the day in the world of golf. However, reason prevailed and I decided to run a piece I've had simmering on the back burner for a while. 

Dues are the lifeblood of any private club. When members resign with an unpaid balance or simply stop paying dues, clubs are faced with a variety of options. Deciding how to handle delinquencies is an important decision for any club.

The time for developing a strategy for how to handle unpaid balances is not when a member's account becomes past due. By that point, it is already too late to handle the situation in the most cost-effective way. As so often is the case, the starting point for developing a policy is the membership agreement.

A well-drafted membership agreement will include a section that fleshes out a procedure in the event of unpaid balances. Think of this part of a membership agreement as a roadmap for what to do when something goes wrong. First, the agreement should specify that if a member resigns, that member is responsible for paying all balances prior to resigning. Where a member simply is late in paying, a club should charge interest on all past due amounts. I recommend something along the lines of 1.5% a month.

For more serious delinquencies, most clubs post the names of the delinquent member along with the amount on a bulletin board. Personally, I find this technique distasteful and ineffective.

More and more often, clubs are taking to filing suit to recover outstanding balances and unpaid dues. I receive an alert every morning regarding every lawsuit filed in the state of New Jersey with "golf" somewhere in the title. In recent months, the number of collection actions against delinquent members has increased significantly.  (Ski, Esq. note: For members out there thinking about letting their balances go and trying to walk away, remember court filings are part of the public record. Anyone, or any club you might care to join in the future, could search your name and potentially see that you had been sued to collect an unpaid balance.)

However, many clubs still do not turn to the courts for recourse. They believe that the cost of utilizing legal process makes recovering on small accounts receivable prohibitively expensive. Even were attorneys' fees not to gobble up any monies due to the club, many clubs wonder how competent an attorney one can really expect for less than $100 an hour. However, there is a solution.

Every membership agreement should include a collection costs provision, in which the member not the club is responsible for all reasonable costs associated with collecting the unpaid balance. Those costs include attorneys' fees.  With most lawyers' fees solidly above $250 an hour, I'm willing to bet that the prospect of paying the club's lawyers is a lot more persuasive than a posting in the men's locker room.
 
For more information or assistance in drafting a membership agreement, please feel free to contact the author at DBCronheim@nmmlaw.com.

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