FLORIDA HOA using Collection Agency/Having 'title' due to lien/renting property

Started by TerryG1 • 13 replies • 3688 views

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TerryG1 (Florida)
Posts: 11

Posted:

Anyone have experience using a Collection Agency to receive past due maintenance fees?
Should the HOA notify the credit bureau?
If an HOA receives title to a lien foreclosure, does the Mortgage Lender reimburse for upkeep of the property?
Not being in the 'house rental' business, what is the best procedure for the HOA once the owners have left the premises? Renting out the property takes money out of the budget and the attorney also needs to intervene, which is more money. Is it better to just let the mortgage lender take the property?

MelissaP1 (Alabama)
Posts: 13,836

Posted:

The HOA doesn't own the home and would have no rights to rent out the property. The bank owns the property if it is foreclosed on. Paying a collection agency to collect past dues should only happen after proper legal channels have been used. The HOA can lien/foreclose on property and just wait that process out for the most part.

Former HOA President

EbonyJ (Tennessee)
Posts: 62

Posted:

We have not used a collection agency yet, but I do know of 5 HOA's that have used a collection agency after three letters had been sent requesting payment. The collection company takes 30% of their assessment and the board has the choice after 6 months whether or not to place on the homeowner's credit report if the collection agency isn't able to collect.. I heard that about 17%-20% of their accounts are collected on...

PetunkaM (Florida)
Posts: 1,009

Posted:

Ha, the mortgage companies are dragging their feet because they do not want to pay the HOA assessments. And, the courts are backed up so it takes 2-4 years to foreclose in good old Florida.

First, check if there is a lien(s) on the property. The 2011 Florida Chapter 720 has also changed and you need to study that to determine who may be responsible for paying the dues and for how many months. Have you done that?
Not sure what the ‘rental’ has anything to do with it.

PetunkaM (Florida)
Posts: 1,009

Posted:

Ha, the mortgage companies are dragging their feet because they do not want to pay the HOA assessments. And, the courts are backed up so it takes 2-4 years to foreclose in good old Florida.

First, check if there is a lien(s) on the property. The 2011 Florida Chapter 720 has also changed and you need to study it to determine who may be responsible for paying the dues and for how many months. Have you done that? Not knowing the details I hesitate to comment any further.
Also, not sure what the ‘renting the property’ has anything to do with it.

SusanM18 (Florida)
Posts: 2

Posted:

Hello new here....From Florida.

I have heard of HOA foreclosing before the mortgage company. They then "take over" the property and can rent the property out.

Is the course of action that a HOA has to follow judicially the same as the mortgage company? Or does the HOA foreclosing cause the foreclosure process to be completely more quickly?

Thanks
SUsan

MelissaP1 (Alabama)
Posts: 13,836

Posted:

It's a bad idea for a HOA to foreclose on a HOA property. There's many reasons for this. Basically, it does the work of the bank for the bank. That's because if the HOA forecloses before the bank does, the bank ALWAYS gets paid first. That means that any debt the owner may owe the bank on the home is paid off FIRST and the HOA and other debtors get the leftovers. It is very rare that an owner is making house payments but not paying dues. Most states don't allow foreclosure to be based on fines ONLY back dues.

If the HOA did own the home after the foreclosure process, they would be responsible for paying their own legal costs and bid price to purchase the home. The first bid on the property does go to the HOA for 1 dollar more than the starting price. That starting price is the amount owed the HOA. Basically making the HOA pay twice. 1 for their own legal fees and again to cover the cost they are out. The HOA may have to assume a mortgage on the home as it's NOT just the foreclosure costs involved in purchasing the home. The HOA may have to finish paying off the property and secure a mortgage to do so.

This means the HOA now has a mortgage payment, is responsible for paying the dues, utilities, maintenance, and other costs associated with rental property. If they decide to sell it, that also involves realtor fees and fixing the property up to sell. A very little or non-existant money making oportunity. If the HOA chooses to rent it out, there's still costs associated with collecting the rent and other issues. Rental property isn't necessarily a cheap investment. There's still property taxes to pay plus insurance etc...

In the end, a HOA foreclosure is useful for one thing...To STOP the bleeding of the HOA. It's basically a band-aid for the HOA to get a non-payer out of their membership. It gives the HOA an oportunity to replace that owner/member with a paying member.It's a HUGE misconception that a HOA foreclosure is a money making oportunnity for the HOA. I know... I've done one...

Former HOA President

JacquelineB2 (Florida)
Posts: 50

Posted:

We have just acquired a home through this process of taking title but no ownership. We had a lot of cleaning, painting and repairs to make that hoa had to pay for. The HOA did advertise the home for rent in an "as-is" state. We have a lot of prospective renters very interested but the problem we encountered was the month-to-month lease. The potential renters didn't want to be turned out of the home with short notice due to the fact that the bank had sold the house. (Orlando, FL)

TerryG1 (Florida)
Posts: 11

Posted:

Thank you all for your valuable information.

Why the HOA ever took the legal advice to allow a home to go to auction is mind boggling. The house has had several realtors receive OFFERS for this house, yet for 'some reason' they can't get the deal done.
For some reason, the realtors say the banks won't respond. The mortgage lender has not filed a foreclosure to date. Only the HOA lien started the process. In hind sight, we should have just let the house wait for the mortgage lender to get it. Now, having the Certificate of Title, we cannot get reimbursed for anything.

We don't understand how realtors can't get this house sold when they have buyers with excellent credit, eager to buy it.

You would think in FLORIDA, mortgage lenders would WANT to have a house sold.

What a mess.

LarryB13 (Arizona)
Posts: 4,099

Posted:

Quote:

Posted By MelissaP1 on 01/10/2012 11:57 PM
It's a bad idea for a HOA to foreclose on a HOA property. There's many reasons for this. Basically, it does the work of the bank for the bank. That's because if the HOA forecloses before the bank does, the bank ALWAYS gets paid first. That means that any debt the owner may owe the bank on the home is paid off FIRST and the HOA and other debtors get the leftovers. It is very rare that an owner is making house payments but not paying dues. Most states don't allow foreclosure to be based on fines ONLY back dues.

If the HOA did own the home after the foreclosure process, they would be responsible for paying their own legal costs and bid price to purchase the home. The first bid on the property does go to the HOA for 1 dollar more than the starting price. That starting price is the amount owed the HOA. Basically making the HOA pay twice. 1 for their own legal fees and again to cover the cost they are out. The HOA may have to assume a mortgage on the home as it's NOT just the foreclosure costs involved in purchasing the home. The HOA may have to finish paying off the property and secure a mortgage to do so.

This means the HOA now has a mortgage payment, is responsible for paying the dues, utilities, maintenance, and other costs associated with rental property. If they decide to sell it, that also involves realtor fees and fixing the property up to sell. A very little or non-existant money making oportunity. If the HOA chooses to rent it out, there's still costs associated with collecting the rent and other issues. Rental property isn't necessarily a cheap investment. There's still property taxes to pay plus insurance etc...

In the end, a HOA foreclosure is useful for one thing...To STOP the bleeding of the HOA. It's basically a band-aid for the HOA to get a non-payer out of their membership. It gives the HOA an oportunity to replace that owner/member with a paying member.It's a HUGE misconception that a HOA foreclosure is a money making oportunnity for the HOA. I know... I've done one...

I agree with most of what you say and would add that during the time the HOA owns the property, it is not collecting any assessments. So, the HOA that forecloses because of unpaid assessments ends up with lots of expenses and no assessments.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Actually the HOA would have to pay it's OWN dues if it owns the property. However, it being "investment property" it may have different tax ramifications...A foreclosure is just a "Stop the bleeding" measure for a HOA....

Former HOA President

MartinH1 (Florida)
Posts: 5

Posted:

I live in an HOA in Delray Beach Fl.
We have taken over two homes in foreclosure for past HOA dues.
We had to clean them, then put in kitchen appliances.
We rented them out. Since we took them both over we paid ourselves back all of the legal costs, and the costs to get them ready to rent.
We are now adding the rent to our income.
It can be done if your association uses the correct lawyer.

SusanM18 (Florida)
Posts: 2

Posted:

How long does a HOA foreclosure take versus a normal bank foreclourse. As the same process is in place(judicial state)the same rules apply. How are HOA's getting the foreclosure done faster?

Thanks

MartinH2 (Florida)
Posts: 24

Posted:

SusanM18
First there are no such things as "normal" bank foreclosures.
In Florida the typical bank foreclosure is on a home that is under water. The bank tries to hold up selling the house as long as possible.

Why? Not counting the problems with ROBO signed mortgages, until the bank sells the house at a loss, they can report the entire mortgage as an asset to the FDIC. Once the house is sold at a loss the bank must report that loss to the FDIC and if there are thousands of such losses the FDIC will require the bank to vastly increase their cash reserves.
So, the simple answer to your question is that the bank will take as long as possible to sell the house.

HOA's are different. While the bank is dragging its heals in selling, the house may be vacant, the bank may not be paying HOA quarterly fees and assessments, and the neighbors will suffer living near a vacant home.

So, the HOA under the new laws passed last year can do the following:

1. Have the HOA attorney place a lien against the house for non payment of HOA fees and assessments.
2. Usually within three months the lien can be converted to a foreclosure in court by the HOA attorney.
3. After another three months the house can be sold to the HOA for the value of the lien.
4. About one month later the HOA will receive title to the house.The bank is still owed the amount of the outstanding mortgage. The HOA does not have to make any mortgage payments to the bank.
5. The HOA can clean up the place and rent it out for a one year lease.
6. If the bank sells the house within the year the buyer must honor the lease.
7. The HOA can pay itself back all of the money owed on the lien and the costs to clean up and rent.
8. After that account come up to zero, the HOA keeps all of the rent as income.

Good luck

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