Related Party Transactions

12 Months Ended

Dec. 31, 2016

Related Party Transactions [Abstract]

Related Party Transactions

Note 10. Related Party Transactions

Legal services for the Company associated with the collection of delinquent assessments from property owners are performed by a law firm (Business Law Group “BLG”) which was owned solely by Bruce M. Rodgers, the Chief Executive Officer of LMFA until and through the date of the initial public offering. Following the offering, Mr. Rodgers transferred his interest in BLG to other attorneys at the firm through a redemption of his interest in the firm, and BLG is now under control of those lawyers. The law firm has historically performed collection work primarily on a deferred billing basis wherein the law firm receives payment for services rendered upon collection from the property owners or at amounts ultimately subject to negotiations with the Company.

Amounts collected from property owners and paid to BLG for 2016 and 2015 were approximately $1,129,000 and $1,581,000, respectively.  As of December 31, 2016 and 2015, receivables from property owners for charges ultimately payable to BLG approximate $6,005,000 and $5,649,000, respectively.

Under the related party agreement with BLG in effect during 2015 and 2016, the Company pays all costs (lien filing fees, process and serve costs) incurred in connection with the collection of amounts due from property owners.  Any recovery of these collection costs are accounted for as a reduction in expense incurred.  The Company incurred expenses related to these types of costs of $609,000 and $506,000, during 2016 and 2015, respectively. Recoveries during 2016 and 2015 related to those costs were approximately $316,000 and $299,000, respectively.  Following the change in ownership of BLG discussed above, the Company began paying BLG a monthly fee of $7,000 per month plus a minimum fee of $700 per unit in those payoff events where the collection amount was limited to the Super Lien amount. Legal fees charged to the Company by BLG in excess of amounts collected from property owners for the years ended December 31, 2016 and 2015 were approximately $146,000 and $95,000, respectively.  

The Company also shares office space and related common expenses with BLG.  All shared expenses, including rent, are charged to the legal firm based on an estimate of actual usage.  Any expenses of BLG paid by the Company that have not been reimbursed or settled against other amounts are reflected as due from related parties in the accompanying consolidated balance sheet. Amounts receivable from BLG as of December 31, 2016 and 2015 were approximately $1,661,000 and $406,000, respectively.

During 2016, the Company experienced a decline in collection events that affected revenues both to the Company and BLG.  The increase in the receivable noted above reflects the decision by the Company to advance funds to BLG based on the amount of their unpaid legal fees due from property owners.  Effective January 1, 2017, the Company entered into a new services agreement with BLG which partially alters the traditional deferred billing arrangement noted above.  Under the new agreement, the Company will pay BLG a fixed monthly fee of $82,000 per month for services rendered.  The Company will continue to pay BLG a minimum per unit fee of $700 in any case where there is a collection event and BLG receives no payment from the property owner.  This provision has been expanded to also include any unit where the Company has taken title to the unit or where the association has terminated its contract with either BLG or the Company.  The Company and BLG are in discussions regarding formalizing a note agreement to be secured by the outstanding receivables of BLG.

Note 10. Related Party Transactions (Continued)

The Company expects repayment of the receivable amount as collection events return to historical levels.