Related Party Transactions

12 Months Ended

Dec. 31, 2015

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 through the date of the initial public offering. The law firm performs collection work 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.

Effective January 1, 2015 the Company entered into a new related party agreement with this law firm regarding the allocation of proceeds related to collection costs. Under the previous agreement, all cash collected from third parties related to collection costs (lien filing fees, process and serve costs) were allocated to the related party law firm. Under the new agreement, any recovery of these collection costs are accounted for as a reduction in expense incurred by the Company. The Company incurred expenses related to these types of costs of $506,000 and $716,000, during 2015 and 2014, respectively. For the year ended December 31, 2015, approximately $299,000 in proceeds from property owners was recognized by the Company and recorded as a reduction of collection costs incurred.

Amounts collected from property owners and paid to BLG for 2015 and 2014 were approximately $1,581,000 and $2,296,000, respectively.  Legal fees charged to the Company by BLG in excess of amounts collected from property owners during 2015 were approximately $95,000.  There were no legal fees charged to the Company by BLG in excess of amounts collected from property owners during 2014.  As of December 31, 2015 and 2014, receivables from property owners for charges ultimately payable to BLG approximate $5,649,000 and $6,605,000, 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 balance sheet. Amounts receivable from BLG as of December 31, 2015 and 2014 were approximately $406,000 and $464,000, respectively.  

After the change in ownership discussed below, upon the occurrence of a triggering even wherein BLG received no payment from the delinquent unit owner, the Company pays BLG $700.  For the period, the Company incurred 113 cases where no payment was received by BLG and the Company incurred expense of $79,100. The Company also began paying BLG $7,000 per month following the change in ownership.

On October 23, 2015 our Chairman and Chief Executive Officer, Bruce M. 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. This enables Mr. Rodgers to work full-time for the Company and to focus his efforts exclusively on implementing our business strategy.