LIENS FOR UNPAID ASSESSMENTS

Started by JeanieB1 • 9 replies • 1436 views

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JeanieB1 (Alabama)
Posts: 8

Posted:

I am currently the president of our HOA. We have a property owner who still has not paid his 2009 annual and special assessments for his two lots. As a consequence he has now incurred additional costs to include late fees, lien filing fees and interest.

Today we received notice from a title company that this individual plans to sell one of his lots. Does anyone know if we can require him to pay the outstanding amounts on BOTH lots in order for him to complete the sale, or must we only require payment of the one lot being sold?

Thanks in advance for your help.

Jeanie

BradP (Kansas)
Posts: 2,640

Posted:

Jeanie

you should only be allowed to recoup costs for the lot he is trying to sell. Unfortunately they are two different things. I would make the title company aware of what he owes on the lot and make sure there is a paper trail in case they screw it up.

JeanieB1 (Alabama)
Posts: 8

Posted:

Thanks, Brad. This is the first time we've run across this type of situation, and we wanted to make sure we had our ducks in a row. We have the proper paper trail (late notices, intent to lien letters, copies of the filed liens, notification of liens, past due statements, etc.)

We figured we could only go after what was owed on the lot being sold, but it never hurts to ask (and it would have been nice treat if we could have gone after what's owed on both lots). Now we have to keep our fingers crossed that the lot makes it to closing. :o)

Happy New Year..........

Jeanie

KellyM3 (North Carolina)
Posts: 2,239

Posted:

Jeannie,

You can absolutely go after what it being owed on the lot that is not for sale but it's bitter legal medicine many HOA boards won't consider - "intent to foreclose" followed up by the real thing with all fees recouped if the owner chooses to keep the deed in his/her name.

Granted, I'm not up on Alabama law and its debt collections laws regarding HOA dues.

JeanieB1 (Alabama)
Posts: 8

Posted:

We know about the foreclosure thing, and you're right, it's a spider web we'd rather not enter if at all possible. Out of 220 lots we only have 4 deliquency, and they are all repeat offenders (haven't paid anything for the last 3 to 4 years). Interest continues to accure, so for our association it's probably best to just wait until these individuals try to sell their home or property especially since not having what they owe is not cerating any immediate problems for the HOA.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

I agreed. Foreclosure is a bad idea unless the right circumstances. I've done one and it is NOT a money making venture. It's a stop-the-bleeding action instead...

I hope you had two separate liens on this property/lot. I think you can only force to pay the lien on the property being sold and not the other one yet. They can't sell the lot until the lien is paid off. So concentrate on the one they are trying to sell that can be forced to pay back. Just make sure the owner knows the other lot is liened too and continue with that lien.

Here in Alabama we do have the option of a "Super lien". It is stronger than a normal lien. It means that if the bank forecloses on a property and the HOA has a "Super lien" on it, it doesn't get washed out like the other lien can. The bank ALWAYS gets paid first whether or not the HOA or bank does the foreclosure. However, the "Super lien" supercedes that and allows the HOA to be paid equally so to speak. Othewise the other lien is subject to being paid off if there is any extra money from the bank foreclosure. Most likely there isn't.

They are more expensive to file I believe. I've never done one but you should ask a lawyer about this option. There are conditions that apply I am sure the property may have to meet before they qualify for such type of liens. It's still a good option to look into if your in an area where rampant bank foreclosures are prevelant.

Former HOA President

KellyM3 (North Carolina)
Posts: 2,239

Posted:

If an HOA can maintain cash flow without aggressive collections, then it's a board decision on how far to take collections. Ultimately, the stoppage of collections at the placing of a lien means the other home owners subsidize the defaulted property owner, something that really bothered me - even more so than weighing the move to take a collection procedure through the foreclosure process. Often, people who have disposable income to hold empty lots aren't so broke as to contribute toward the maintenance of a community that works to keep things nice, neat and value stable if not value enhancing.

But this was a long journey for me as a HOA director then president. I look at investor-types (who are mostly our delinquency problems) versus the owners who live on the property and want the best besides property cash flow or re-sell potential. Then, it dawned on me that you can issue liens and stop as long as your regular budget items and monthly contract vendors are paid from existing cash flow. However, the chronically missing dues that people won't pay quietly starve your reserve funds, so you don't save as much money for the big-ticket disasters.

There is no easy choice in matters of non-collections. You have my empathy.

LarryB13 (Arizona)
Posts: 4,099

Posted:

The current board of directors of my association went on a jihad a couple of years ago to try to collect every last cent that was owed. Our development is former ranch land subdivided into undeveloped parcels 36 acres and larger. Most of the parcels are still undeveloped. The development is located right in the middle of the Forclosure Vortex of Phoenix, Las Vegas, and Southern California.

We did take a small number of parcels all the way to foreclosure. There were no bids for the parcels at the foreclosure auctions, so we are now the proud owners of at least three parcels of undeveloped property in the middle of nowhere but located within drivng distance of several major cities where most of the population is struggling just to keep a roof over their heads. It will be years before those parcels find buyers. In the meantime, we will have to pay taxes on them and we will not collect any assessments. Oh yeah, instead of collecting the $1,500 that was due we spent about $25,000 in legal fees.

I would caution any association that has a vacant parcel or lot with unpaid assessments to think foreclosure through to the end. You may find yourself worse off than if you just ignore the delinquent assessments. In hindsight, our association would have been no worse off had we found a roulette table and put $25,000 on red.

JeanieB1 (Alabama)
Posts: 8

Posted:

This is the first time I've ever participated in any type of forum, and I am loving the fact that you all are taking the time to share your knowledge.

We definitely are not going to go the foreclosure route. We have ample money in our reserve funds (for major emergencies, etc.) that these four homeowners are not causing us any real grief. To date we've been able to collect on all previous unpaid assessments whenever the home or property sold (even those foreclosed upon).

Previous boards were not collecting interest, but we put that into action two years ago and it has paid off nicely thus far. At 12% we're are at least getting something for our patience. :o)

I look forward to reading other subjects within this HOA forum (especially those on corrupt board members). Appears there are some in every crowd. Ugh

KellyM3 (North Carolina)
Posts: 2,239

Posted:

Jeannie,

Pay attention to future delinquency rates as a result of an absolute "No Foreclosure" policy. When that gets out or property owners learn your leniency, you could face having liens in many properties where the owners have no intention of selling. There's no way one could advocate on behalf of foreclosure but I don't feel sympathy on property owners who obviously pay their monthly mortgage/bank loan and then not support the HOA that, if functioning competently, keeps the community stable and adding value as best possible.

What is the balance? I've never really figured it out.

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