Get 2 months of free community web site hosting from Community123.com!
Sunday, August 19, 2018
Get 2 months of free community web site hosting from Community123.com!


SBCA: Free education for HOAs and condos on satellite placement issues.
(National Trade Organization)
Helping HOAs, condos and property managers with satellite placement issues since 1986.
Only members have access to all features.
Click here to join HOATalk for Free! Members click here to login and access all features.
Subject: Foreclosures and previous dues
Prev Next
Please login to post a reply (click Member Login on the menu).
Author Messages
DonS7
(Georgia)

Posts:1


02/02/2012 7:29 AM  
I am the treasurer for our community HOA and have received contact from a agent representing a lender that foreclosed on a home in our community. The agent is asking for a completed W9 form and insists the lender will not owe the unpaid mandatory HOA dues and late fees. Any help would be appreciated.
MelissaP1
(Alabama)

Posts:7534


02/02/2012 8:22 AM  
The lender is the bank correct? I believe it is the owner who owes the dues not the bank. However, once the bank has finished foreclosing and owns the property they are responsible from that point on until a new owner buys it. That new owner will now be a HOA member and responsible for ONLY the dues from their date of purchase.

The banks will drag their feet to pay. Expect them to catch uo on the dues when they sell the property IF then...I hope your HOA had a lien on that owner or otherwise you may not be able to collect the back dues owed...

Former HOA President
BruceF1
(Connecticut)

Posts:2535


02/02/2012 9:19 AM  
Don,

An IRS Form W9 is a request to provide a TIN (Taxpayer Identification Number) to the requester (in this case, the lender). The TIN is either a person's SSN or an organization's EIN. In this case, they are asking for the EIN of the HOA.

My guess is that the lender is telling you that even though they have taken ownership of the property, they are not responsible for the (former) owner's unpaid assessments and late fees. You will still have to pursue collection activities against the former owner to collect them.

However, as long as the lender still holds the property, they should be liable for any future assessments until the property is sold. That is probably why they want the form W9.
KimB14
(Florida)

Posts:7


02/02/2012 10:12 AM  
You may want to check your state statutes regardings this, if there are any. Florida has very specific requirements on who is responsible for what in bank foreclosures.
PeterD3
(Florida)

Posts:708


02/02/2012 11:01 AM  
Yes Kim and limited past dues recovery (1 yr. max I believe).
EdC5
(Florida)

Posts:55


02/03/2012 6:18 AM  
Posted By PeterD3 on 02/02/2012 11:01 AM
Yes Kim and limited past dues recovery (1 yr. max I believe).




One year or 1% of the mortgage, whichever is less.

Edward J Cooke, CMCA, LCAM
PeterD3
(Florida)

Posts:708


02/03/2012 9:28 AM  
Details, Details

Thanks
KellyM3
(North Carolina)

Posts:1295


02/04/2012 7:00 AM  
Foreclosures by banks, in most states, will end all HOA efforts to collect delinquent dues. The foreclosure act "cleanses" the liens and clears the title.

The bank, which owns a clear deed, then begins owing HOA dues and the HOA board would have to, then, chase the bank through collections as it did the previous owner - another long-term process. What a pain.
Dues travel with the deed and not owners unless foreclosure occurs against the deed-holder.

Details are needed but some states allow HOA liens to hold a superior status to first mortgages. I don't think Georgia bestows HOA liens such a "super" status.

If the bank has officially foreclosed, auctioned the house to no new buyer, then you have a new dues account.
KellyM3
(North Carolina)

Posts:1295


02/04/2012 7:01 AM  
Foreclosures by banks, in most states, will end all HOA efforts to collect delinquent dues. The foreclosure act "cleanses" the liens and clears the title.

The bank, which owns a clear deed, then begins owing HOA dues and the HOA board would have to, then, chase the bank through collections as it did the previous owner - another long-term process. What a pain.
Dues travel with the deed and not owners unless foreclosure occurs against the deed-holder.

Details are needed but some states allow HOA liens to hold a superior status to first mortgages. I don't think Georgia bestows HOA liens such a "super" status.

If the bank has officially foreclosed, auctioned the house to no new buyer, then you have a new dues account.
LawrenceC1
(Georgia)

Posts:480


02/05/2012 9:13 AM  
Posted By KellyM3 on 02/04/2012 7:01 AM
Foreclosures by banks, in most states, will end all HOA efforts to collect delinquent dues. The foreclosure act "cleanses" the liens and clears the title.



Kelly,

I believe you are correct in saying that the liens expire after a foreclosure, and the association no longer has a claim against the property for unpaid dues.

However, unless there is an accompanying bankruptcy by the former owner, the unpaid dues are still a personal obligation of the former owner. The HOA can still attempt to collect those unpaid dues, even though the HOA no longer holds a lien on the property.

And you are also correct that in Georgia we do not have a law that grants an HOA "super" lien status.
KellyM3
(North Carolina)

Posts:1295


02/05/2012 2:45 PM  
Check your by-laws on receiving judgements post-foreclosure. My HOA, by rule, must write off any delinquent dues if a property is foreclosed by a senior lien holder. So, we don't have the option of receiving a judgement. It's a foreign concept my board cannot consider.

Any time you can collect HOA dues, your diligent dues payers are not subsidizing non-payers.
FredB4
(Ohio)

Posts:375


02/05/2012 2:56 PM  
Usually banks leave the property in the former owners name so they don't have to be responsible for the dues. When they are ready to close on a sale they transfer the property over to their own name. From that point on they are responsible for any dues. It is an outrage that they are able to legally do that.
JeffR7
(California)

Posts:251


02/05/2012 4:39 PM  
A foreclosure is a process by which line holder takes legal ownership of a property. During a foreclosure all liens senior to the one foreclosing must be paid and all liens that are junior are dismissed.

If a bank didn't transfer property to its name it means it hasn't foreclosed on it.

Few states treat HOA liens as senior to first mortgage in those state HOAs will be paid when a lender forecloses on a property. In all other states a foreclosure means that that HOA's lien is gone.

That, however, doesn't mean that the former owners is forgiven his/her obligation to pay. An HOA may pursue other means of collecting on its debt. That could include small claims courts or getting an attorney. Very often an owner will also a bankruptcy at the same time. If that's what they did and they included their HOA debt in a bankruptcy the HOA is out of money.

Once a lender forecloses on a property the lender is legally responsible to pay for any and all assessments including special assessments that would be recorded while a bank owns this property. Most banks will not pay their assessments monthly but will wait and pay it all in one lump sum when they sell the property.

FredB4
(Ohio)

Posts:375


02/06/2012 4:42 AM  
"If a bank didn't transfer property to its name it means it hasn't foreclosed on it."

Jeff,
Are you speaking from experience or is that perhaps a State thing in California ? We have had two units here where the lender removed the owners, locked up the property and waited to transfer title until just before selling.Usually after a sale has been arranged.
They put it in the hands of another company to come secure and clean up the place ready for a sale. Just before selling is when they transfer title cheating us out of what are usually months of dues.
If they haven't foreclosed how can they legally do that ? are we missing something here ?
KellyM3
(North Carolina)

Posts:1295


02/06/2012 4:52 AM  
I've never noticed, but haven't looked very hard, here in NC to see if banks delay the deed transfer while controlling the property. I think the bank can get away with it as long as the owners leave the home without a fight and then don't see that the bank is allowing more debt to pile up in their name - at least until the bank sells the property.

However, I am curious to know this - if the bank doesn't switch deeds, then the HOA debt would appear to still be valid and the liability of owning the home would still rest with the foreclosed previous owner. Is there a glimmer of hope for a collection of dues when the property sells?
MelissaP1
(Alabama)

Posts:7534


02/06/2012 5:53 AM  
I've been where you are...Give up the hope and put in a bit of prevention...This is a learning experience at this point. If the people didn't have the money to pay their mortgage or fight the foreclosure, then why would the HOA get any money? The lien is most likely useless at this point as the BANK ALWAYS GETS PAID FIRST and FOREMOST. All other debtors get whatever is left over. Liens work as a good threat when owners are in a situation to sell their property. They don't work as well when the owner is in a position of losing everything. However, it is still best to have a lien no matter what as that is your only hope... After the fact not so much...

We had a policy of after 6 months of non payment of dues we placed a lien on the property. This way we had an established policy and those who violated it knew they would be liened 6 months no matter how much they protested. This also helped define what is late or non paying situation.

I also discovered the local newspaper offers a few times a week a "LEGAL" section in the classified section of the newspaper. It is best to read this section. This is where the foreclosure and liens are posted. This way your HOA can find out what homes in the HOA are facing foreclosure/lien/legal action and take the appropriate actions. I once found an owner who's home was to be taken away in a few days and able to put a lien on it prior. Didn't get the money from it, but did atleast learn how to put in measures in the future for this NOT to happen again.

It's time to chalk this up to learnining experience to prevented measures...

Former HOA President
FredB4
(Ohio)

Posts:375


02/06/2012 1:09 PM  
Mellisa,
Thanks for the info on the legal section in the newspaper... didn't know about that.

Kelly,
In our experience we didn't get any past dues ... only those owed after the transfer of title. Banks can hold onto the property for months without paying anything to the HOA putting added finiancial burden on the other owners.
KarenT
(Washington)

Posts:241


02/06/2012 1:39 PM  
Just an FYI - our HOA has had success in collecting dues from two major banks. One which was not in foreclosure and one where the owner filed bankruptcy and "surrendered" the property to the lender. In both cases, persistence paid off.
JohnC46
(South Carolina)

Posts:7634


02/06/2012 2:28 PM  
Posted By KarenT on 02/06/2012 1:39 PM
Just an FYI - our HOA has had success in collecting dues from two major banks. One which was not in foreclosure and one where the owner filed bankruptcy and "surrendered" the property to the lender. In both cases, persistence paid off.




Karen

From what I understand it seems to be taht if you do not file a lien you might well see nothing but if you do file a lien, you will have better chance of collecting.

I decided to read/ask questions about liens when some of my fellow HOA Members said they believed it would cost us (the HOA) more to legally persue it then we would collect. The more I read and the more questions I asked, the more I realized there might well be less expensive ways (small claims court, Magistrates Court, etc.) for an HOA to persue it. I also found out that many attorneys might lead/scare you to believe it cannot be done without their assistance...as in billable hours...surprise....surprise....LOL

Karen, I agree with you. Do persue it.

FredB4
(Ohio)

Posts:375


02/07/2012 5:59 AM  
John,
interesting ... this is a situation that many of us on boards face. Cost of pursuing it is always the topic that comes up. Anything you can share on what you found out would be appreciated.
BradP
(Kansas)

Posts:2640


02/07/2012 6:38 AM  
Posted By JohnC46 on 02/06/2012 2:28 PM
Posted By KarenT on 02/06/2012 1:39 PM
Just an FYI - our HOA has had success in collecting dues from two major banks. One which was not in foreclosure and one where the owner filed bankruptcy and "surrendered" the property to the lender. In both cases, persistence paid off.




Karen

From what I understand it seems to be taht if you do not file a lien you might well see nothing but if you do file a lien, you will have better chance of collecting.

I decided to read/ask questions about liens when some of my fellow HOA Members said they believed it would cost us (the HOA) more to legally persue it then we would collect. The more I read and the more questions I asked, the more I realized there might well be less expensive ways (small claims court, Magistrates Court, etc.) for an HOA to persue it. I also found out that many attorneys might lead/scare you to believe it cannot be done without their assistance...as in billable hours...surprise....surprise....LOL

Karen, I agree with you. Do persue it.





John

I would agree with you with one caveat, the board has to know when to pull back. For us filing liens is a no brainer because the cost is minimal, after that I think the board has to make an educated decision on the situation. Do we continue to pursue and spend money on a debt that in reality has no chance of collection...those are case by case situations.
JohnC46
(South Carolina)

Posts:7634


02/07/2012 7:05 AM  
Posted By FredB4 on 02/07/2012 5:59 AM
John,
interesting ... this is a situation that many of us on boards face. Cost of pursuing it is always the topic that comes up. Anything you can share on what you found out would be appreciated.




Fred

Understand I am not an attorney and what I researched was primarily SC law.

In SC we have a Magistrates Court for civil judgements less then $7,500.00. Some say it is the same as Small Claims Courts in other states. It cost $80.00 to file a claim. If the defendant does not show up for the hearing in front of the Magistrate or loses the case, they are ordered to pay. If they do not pay then the Magistrates Court will notify the Clerk of Courts and a Judgement Lien is filed against the defendant.

I have skipped over things as I am not trying to play attorney but just put you on a track to explore.

Brad

I agree one has to look at all aspects and even draw a line in the sand.

We have two situations here.

First is a forclosure and the homeowner says he is up to his eyeballs in debt and as much as he would like to pay his dues, he just does not have the money. Food for his family comes first.

Second home is in estate (owner died) and on the market. They simply ignore our letters.

That said, it might not be possible to get blood from a stone (1st case) but one will never know for sure until one squeezes the stone (2nd case)...LOL

FredB4
(Ohio)

Posts:375


02/07/2012 10:17 AM  
John,
Thanks. We have small claims court but I may be mistaken about the amount that can be pursued in that court. Will check it out.
FredB4
(Ohio)

Posts:375


02/07/2012 10:20 AM  
I would think that an heir would be responsible for the dues. Certainly you should investigate putting a lien on the property.
KellyM3
(North Carolina)

Posts:1295


02/07/2012 10:38 AM  
Brad,

HOA boards need to have and follow a well-defined collections process that can be uniformly applied. Otherwise, board decisions can, but not necessarily, become arbitrary. One guy "isn't worth chasing" but the other is "worth spending the money to chase." To overtly do this, I think, sets you up for trouble.

Banks on the brink of seizing a house can't be chased with any success as a write-off would surely follow.

Small claims court filings, after a foreclosure extinguishes a debt against a property, doesn't seem viable to me. HOA dues are backed by the property deed. If a foreclosure extinguishes all interests of junior lien holders, I'm not sure how you argue the debt is still owed. Going to small claims court in lieu of foreclosure seems doable as a debt legally exists. Thank goodness my by-laws forbid us from collecting dues once a homeowner has legally lost their home. I wouldn't do it.
LawrenceC1
(Georgia)

Posts:480


02/07/2012 4:18 PM  
Posted By KellyM3 on 02/07/2012 10:38 AM
Thank goodness my by-laws forbid us from collecting dues once a homeowner has legally lost their home.


Kelly,

Could you post the clause in your bylaws that forbids collecting after a foreclosure? It's something I haven't encountered. It's unusual to see a developer give anyone a break that they aren't forced to give.
JohnC46
(South Carolina)

Posts:7634


02/07/2012 5:13 PM  
Posted By LawrenceC1 on 02/07/2012 4:18 PM
Posted By KellyM3 on 02/07/2012 10:38 AM
Thank goodness my by-laws forbid us from collecting dues once a homeowner has legally lost their home.


Kelly,

Could you post the clause in your bylaws that forbids collecting after a foreclosure? It's something I haven't encountered. It's unusual to see a developer give anyone a break that they aren't forced to give.




Good question.
KellyM3
(North Carolina)

Posts:1295


02/07/2012 7:15 PM  
Here's how it reads:

"The lien of the assessments provided for herein on any lot shall be subordinate to the lien of any first mortgage and ad valorem taxes on such lot. Sale or transfer of any lot shall not affect the assessment lien; however, the sale or transfer of any lot pursuant to mortgage foreclosure or any proceeding in lieu thereof, shall extinguish the lien of such assessments as to payments which became due prior to such sale or transfer. No sale or transfer shall relieve such lot form liability for assessments thereafter becoming due or from the lien thereof."

I read to that paragraph to say a mortgage foreclosure ruins my HOA's chances at collecting on any liens for past-due monthly fees.
FredB4
(Ohio)

Posts:375


02/08/2012 5:22 AM  
Don't you just love "lawyer talk" to make things as complicated as possible.
LawrenceC1
(Georgia)

Posts:480


02/08/2012 5:56 AM  
Posted By KellyM3 on 02/07/2012 7:15 PM
Here's how it reads:

Kelly,
I am not a lawyer and don’t even play one on TV, but the language in your document is similar to what is in ours. This is how it has been explained to me…
The lien of the assessments provided for herein on any lot shall be subordinate to the lien of any first mortgage and ad valorem taxes on such lot.


This is fairly clear. The HOA lien comes after the first mortgage and tax liens.
Sale or transfer of any lot shall not affect the assessment lien;


Also clear. Although I don’t understand how a sale can occur without first satisfying the lien.
however, the sale or transfer of any lot pursuant to mortgage foreclosure or any proceeding in lieu thereof, shall extinguish the lien of such assessments as to payments which became due prior to such sale or transfer.


Here’s the confusing clause. What it appears to say is that after a foreclosure the lien is extinguished. This is to be expected, and it exempts the bank that forecloses on the property from having to make good on outstanding liens. Banks want to see this clause in governing documents before they grant a mortgage.
No sale or transfer shall relieve such lot form [sic] liability for assessments thereafter becoming due or from the lien thereof.


This last clause simply says that any new assessments that come after the a sale or foreclosure are okay.

There doesn’t seem to be anything here that would prevent your HOA from pursuing debts as a personal obligation of the former homeowner – even after a foreclosure.

And since you can do this, you may be obligated to do it because of your fiduciary responsibility to the members. Please check with your attorney.
KellyM3
(North Carolina)

Posts:1295


02/08/2012 6:57 AM  
NC has no statutes allowing for wage garnishment to pay on judgements like HOA dues defaults. I can't recommend seeking small claims court action in a post-foreclosure situation. If we can't collect by attaching a lien to a tangible, static piece of property and following through, then we'll not track down the guy who's obviously moved somewhere else.

It's throwing good money after bad......sometimes people are broke and you take the loss. Throwing away money in this case is more wasteful than spending legal fees to hunt down someone who may be out of state. My fiduciary responsibility is to preserve our funds in this case, not chase for the sake of chasing people at any cost to the existing dues payers.
JohnC46
(South Carolina)

Posts:7634


02/08/2012 7:12 AM  
Kelly

While I agree one has to decide how to wisely spend HOA funds, in SC it costs $80.00 to file a Magistrates Court claim.

For that cost, I lean toward filing whatever, whenever on the chance money might be collected.

KellyM3
(North Carolina)

Posts:1295


02/08/2012 7:13 AM  
$80 might be worth a shot.
BradP
(Kansas)

Posts:2640


02/08/2012 10:43 AM  
Posted By KellyM3 on 02/07/2012 10:38 AM
Brad,

HOA boards need to have and follow a well-defined collections process that can be uniformly applied. Otherwise, board decisions can, but not necessarily, become arbitrary. One guy "isn't worth chasing" but the other is "worth spending the money to chase." To overtly do this, I think, sets you up for trouble.

Banks on the brink of seizing a house can't be chased with any success as a write-off would surely follow.

Small claims court filings, after a foreclosure extinguishes a debt against a property, doesn't seem viable to me. HOA dues are backed by the property deed. If a foreclosure extinguishes all interests of junior lien holders, I'm not sure how you argue the debt is still owed. Going to small claims court in lieu of foreclosure seems doable as a debt legally exists. Thank goodness my by-laws forbid us from collecting dues once a homeowner has legally lost their home. I wouldn't do it.




Kelly

Exactly my point, not every collection situation is the same. You could be dealing with someone in bankruptcy, on the verge of bankruptcy, in foreclosure or on the verge of foreclosure. You may be dealing with a company out of state or a person's estate or a rich doctor who decides he doesn't want to pay. You can't apply the same collection practice for all of these people as each scenario is different. Would the board sink money into court costs to go after the doctor, more than likely yes because they know the risk is worth it. would they sink money into someone on the verge of bankruptcy? i wouldn't as that is money wasted. As I mentioned in our state filing a lien is $8 plus 26 cents for every hundred dollars owed. That is a no brainer as step one. Beyond that requires you to examine the situation and see what is both practical and good business.
KevinK14
(Florida)

Posts:2


06/07/2018 10:52 AM  
We've just been recently handed everything from a 3rd part management company and the elected officers are still new and learning the rules for every aspect. The same situation (foreclosure and late fees) exist for a situation in my HOA. We've been asked by the lender (Bank) to complete a W-9 for 2017. However, we're not sure if we check a C or S Corp or "other". We currently file an 1120-H for tax purposes. I believe it should be a "C"...but, we want to make sure. Any insight would be appreciated. Thanks!
KellyM3
(North Carolina)

Posts:1295


06/07/2018 11:09 AM  
Kevin,

This is very old conversation thread. Please post this inquiry as a brand new posting and you should get better response.
JoyceR2
(Virginia)

Posts:127


06/15/2018 7:23 AM  
Is this a Virginia law as well>1 yr or 1%?
Please login to post a reply (click Member Login on the menu).
Forums > Homeowner Association > HOA Discussions > Foreclosures and previous dues



Get 2 months of free community web site hosting from Community123.com!



News Articles Provided by: Community Associations Network
News, articles and blogs about condos/HOA's

Only members have access to all features.
Click here to join HOATalk for Free! Members click here to login and access all features.







General Legal Notice:  The content of forum messages are from the posting member and have not been reviewed nor endorsed by HOATalk.com.  Messages posted by HOATalk or other members are for informational purposes only, are not legal or professional advice and do not constitute an attorney-client relationship.  Readers should not act upon this information without seeking professional counsel.  HOATalk is not a licensed attorney, CPA, tax advisor, financial advisor or any other licensed professional.  HOATalk accepts ads from sponsors but does not verify sponsor qualifications nor endorse/guarantee any sponsor's product or service.
HindmanSanchez Legal Notice:  (For messages posted by HindmanSanchez) This message has been prepared by HindmanSanchez for informational purposes only and does not constitute legal advice. This information is not intended to create, and receipt of it does not constitute an attorney-client relationship. Members of HOATalk.com should not act on this information without seeking professional counsel. Please do not send us confidential information unless you speak with one of our attorneys and get authorization to send that information to us. If you wish to initiate possible representation, please contact an attorney in our firm. Our attorneys are licensed to practice law in the state of Colorado only.

Legal Notice For Messages Posted by Sponsoring Attorneys: This message has been prepared by the sponsoring attorney for informational purposes only and does not constitute legal advice. This information is not intended to create, and receipt of it does not constitute an attorney-client relationship. Readers of HOATalk.com should not act on this information without seeking professional counsel. Please do not send any sponsoring attorney confidential information unless you speak with the sponsoring attorney or an attorney from the sponsoring attorney’s firm and get authorization to send that information to them. If you wish to initiate possible representation, please contact an attorney in the firm of the sponsoring attorney. Sponsoring attorneys that post messages here are licensed to practice law in a specific state or states as indicated in their message signature or sponsor’s profile page. (NOTE: A ‘sponsoring attorney’ is an attorney that is a HOATalk.com official sponsor and is identified as such in the posted message or on our sponsor page.)

Copyright HOA Talk.com, A Service of Community123 LLC ( Homeowners Association Discussions )   Terms Of Use  Privacy Statement