Due to Related Party
|6 Months Ended|
Jun. 30, 2021
|Related Party Transactions [Abstract]|
|Due to Related Party||
Note 4. Due to Related Party
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.
The Company pays BLG a fixed monthly fee of $82,000 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.
Amounts expensed by the Company to BLG for the Three and Six Months ended June 30, 2021 and 2020 were approximately $246,000 and $492,000 for 2021 and $250,000 and $509,000 for 2020, respectively. As of June 30, 2021 and December 31, 2020, receivables from property owners for charges ultimately payable to BLG approximately $1,108,000 and $1,332,000, respectively.
Under the related party agreement with BLG in effect during 2021 and 2020, 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 is accounted for as a reduction in expense incurred. The Company incurred expenses related to these types of costs for the Three and Six Months ended June 30, 2021 and 2020 were $28,000 and $50,000 for 2021 and $31,000 and $67,000 for 2020, respectively. Recoveries during the Three and Six Months ended June 30, 2021 and 2020, related to those costs were approximately $26,000 and $46,000 for 2021 and $ 51,000 and $96,000 for 2020, respectively.
The Company also shares office space and related common expenses with BLG. All shared expenses, including rent, are charged to BLG 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. BLG was charged approximately $17,000 and $34,000 for the office sub-lease during the Three and Six Months ended June 30, 2021.
Amounts payable to BLG as of June 30, 2021 and December 31, 2020 were approximately $174,200 and $158,400, respectively. In the first Six Months of June 30, 2021, the Company subsequently recouped $110,000 of previously written-off amounts to BLG.
The entire disclosure for related party transactions. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef