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Subject: Florida - Non payment of assessments, Foreclosure and Chapter 13 Bankruptcy
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GeorgeS21
(Florida)

Posts:1481


07/25/2019 12:36 PM  
Hi All,

Got cornered into pres job for 314 property single family POA in Florida ... trying to herd cats and pick up pieces.

Have a CAM and the usual lien process for non-payment of assessments - CAM is not particularly helpful - they do their basic job, but that is about it.

Currently, have an owner who has not paid last two cycles of assessments, we have been assessing late fees and interest, bank is foreclosing and owner has filed Chapter 13 ("wage earner bankruptcy"). Supposedly, Chapter 13 stops foreclosures until some process can be worked out to allow payment plan for the Chapter 13 filer.

Anyone been involved from the their HOA/POA in this circumstance?

I've got a meeting with the POA attorney on Monday, but would like to get some perspective ...

Thanks.
SheliaH
(Indiana)

Posts:2763


07/25/2019 1:12 PM  
The property manager's primary job is to manage your common areas, so sending late notices and keeping track of who's on time with paying assessments is a bit job in itself. If you don't have a collection policy that's one of the first things you need to discuss with the association attorney - after you come up with an action plan to deal with this homeowner.

Now, it's true declaring bankruptcy puts collection procedures like liens on hold. In chapter 13, a payment plan is established to repay creditors like a HOA. Payment will be slow but if things work out,the association will get its money. Make sure your attorney files a proof of claim with the court.

Normally, the association would have already filed a lien before a mortgage company started foreclosure but if that didn't happen, that may be futile to do it now because the mortgage company will get its money before anyone, unless there's a tax lien. Otherwise it there's not enough money to pay everyone, the HOA will usually be SOL.

At this point, you may need to go after the homeowner personally because he or she is still responsible for the delinquent assessments until the house changed hands. However that may be a lost cause, dept on how much is owed to everyone else.

Your attorney should give you several options depending on the details, so consider them carefully. You may get all your money back, but you may get nothing, so try to do what you can to get some money.

By the way, don't you have a treasure on your board? If so, put him\her to work in developing a collection policy with your attorney and property manager's help. Your current policy may need some simple tweaks. Just make sure your homeowners are informed of their responsibilities and enforce the policy fairly and consistently. Good luck!
RichardP13


Posts:0


07/25/2019 1:25 PM  
If the foreclosure process is currently stalled, you could ask the bank to pay them under the remedies section of the PUD rider, https://www.fanniemae.com/content/legal_form/3150.pdf

Not many people in the country know how to do this, as it involves tracking the MIN through MERS.

If the bank proceeds with foreclosure and the H/W file Chapter 13, well then. the association is pretty much SOL.
SheilaJ1
(South Carolina)

Posts:121


07/25/2019 1:33 PM  
Wasn't worth it to pursue them, wrote it off as bad debt. We spent more on the attorney's advice to tell us this than the actual pre-petition debt amount.
GenoS
(Florida)

Posts:3364


07/25/2019 1:57 PM  
Posted By SheliaH on 07/25/2019 1:12 PM
At this point, you may need to go after the homeowner personally because he or she is still responsible for the delinquent assessments until the house changed hands.

There's also the added complication that, in Florida, the purchaser of a property at a foreclosure sale will be responsible for any HOA dues that had accrued prior to the foreclosure. This general rule is dependent on the association's governing documents and when they were recorded. This is because the relevant legislation was passed in 2007 and recorded declarations prior to that date are immune from its effects.

Also, first mortgagees get a partial pass from this rule. I'm not sure at all how a Chapter 13 BK would play into all that.



JohnC46
(South Carolina)

Posts:8877


07/25/2019 2:09 PM  
Posted By SheilaJ1 on 07/25/2019 1:33 PM
Wasn't worth it to pursue them, wrote it off as bad debt. We spent more on the attorney's advice to tell us this than the actual pre-petition debt amount.





The way it works with us:

3 months behind. Polite letter from MC.

4 months behind. Less polite letter from MC.

5 months behind. Letter from our lawyer saying unless paid in 30 days, a lien will be filed, foreclosure will commence, and credit bureau reporting to begin. Our lawyer charges us $75 for this letter.

6 months behind. Letter from lawyer saying a lien has been filed and foreclosure has begun. Additionally there is now a $400 legal fee added to what is already owed. No charge to us. Lawyer gets the $400 if paid.

At this time we do nothing more and neither will the lawyer unless we request him to. We have never done a foreclosure and I do not see us ever doing one.
SheilaJ1
(South Carolina)

Posts:121


07/25/2019 2:23 PM  
Posted By JohnC46 on 07/25/2019 2:09 PM
Posted By SheilaJ1 on 07/25/2019 1:33 PM
Wasn't worth it to pursue them, wrote it off as bad debt. We spent more on the attorney's advice to tell us this than the actual pre-petition debt amount.





The way it works with us:

3 months behind. Polite letter from MC.

4 months behind. Less polite letter from MC.

5 months behind. Letter from our lawyer saying unless paid in 30 days, a lien will be filed, foreclosure will commence, and credit bureau reporting to begin. Our lawyer charges us $75 for this letter.

6 months behind. Letter from lawyer saying a lien has been filed and foreclosure has begun. Additionally there is now a $400 legal fee added to what is already owed. No charge to us. Lawyer gets the $400 if paid.

At this time we do nothing more and neither will the lawyer unless we request him to. We have never done a foreclosure and I do not see us ever doing one.


You can't do any of this after they file for chapter 13. You can't attempt to collect on a pre-petition debt, you can't even send them a letter about the debt. It all has to go through the court by filing proof of claim. You'll get pennies for each dollar they owe through the repayment plan.


Now if it was post-petition HOA dues, that works like a regular debt.

RichardP13


Posts:0


07/25/2019 2:25 PM  
No charge to us. Lawyer gets the $400 if paid.



When does a lawyer do anything for free?
MelissaP1
(Alabama)

Posts:8762


07/25/2019 5:32 PM  
Hate to say it but your HOA is SOL if the bank foreclosing and bankruptcy filed. All hope is not lost though. You can still file a lien but know may not get any of the filing fees or dues owed collected. It may just put you in line of the other creditors. Some states they have "Super Liens" that would put you on equal footing of the bank. However, 99% of the time the bank is always going to get paid first and foremost.


A foreclosure is nothing more than a "Stop the bleeding" effort. Your just trying to fill in a hole that is created by them owing money. It is by far NOT a profit making venture as many would like to cry about.


The hopeful part... Not sure what Florida's laws are for right for redemption. Some states it's zero to a year. That is the period of time the owner can pay back what they owe to get their property back. No one can basically touch the property till that period is over. It's a bit risky putting in money into a property just to have it taken out from under you.


Well a bank foreclosure may allow the home to be sold a bit faster and leave it empty for less time. Filing bankruptcy they could be making efforts to stay. Which means hopefully less likely to have an abandon property sitting around collecting dust.

Former HOA President
CathyA3
(Ohio)

Posts:530


07/26/2019 8:24 AM  
We had experience with one condo: owner stopped paying monthly assessments, we put a lien on the property, then the bank foreclosed. Sadly the lender is the senior lien in Ohio. We had our attorney file a cross claim (legal notice that the association had a claim if there were anything left after the foreclosure procedure worked its way through the courts). We ended up writing off the debt.

We also have one owner who is chronically unemployed, has been through Chapter 13 in the past, gets caught up on monthly assessments just enough to make it more costly to pursue foreclosure than to let it ride. VERY frustrating. I'm no longer on the board, but when I resigned we were talking about taking this person to small claims court just to reset expectations a bit since I thought we were being played.

Some years back Ohio legislators were talking about creating a "super lien" for condo and homeowner associations, but unfortunately that hasn't happened yet. Without it, associations generally are at the bottom of the barrel when it comes to recouping delinquent assessments.
SheliaH
(Indiana)

Posts:2763


07/26/2019 10:11 AM  
When I joined our board, there was one resident who was ALWAYS late and she'd be on the verge of a lawsuit being filed when she'd suddenly pay up and usually start up again after a year. By the time I became treasurer, she'd resorted to using bankruptcy as a way to put off paying. That's when I got really pissed and the next time she fell behind, I pushed for putting a lien on her home.

At least twice, this lady's M.O.: fall behind, gets sent to our attorney for collections, we'd file a lien, then a sheriff's sale would be and - on the day before, she'd file chapter 13, thus stopping everything. Then she'd go to court, but eventually her case would get tossed and we'd have to start over.

Once, I took off from work one afternoon to attend the hearing, as our attorney was going to have me speak about this woman's BS behavior - and then the judge said she hadn't done what she promised and he was tossing the case. Again. Her attorney later told us he was done with her as well (guss she didn't pay him either - one of those TV bankruptcy attorneys, as I recall (no, not THAT one!)

The last time she did this was shortly after I left the board. The hearing was on one of those near-polar vortex days (that one wasn't as bad as the one we had in January this year). The hearing was held by telephone and the woman went on an on about her son being on disability and whatnot, and for some reason, the judge gave her yet another chance (WTF???) Our president later told me the judge threatened to prevent her from filing chapter 13 again if she didn't pay up. She did pay a little, then she stopped (again) and a few months later, the president told me the judge had tossed the case (again).

That may be an extreme example of how kooky these cases can get, and I neglected to mention before that if you can, go to the bankruptcy hearing and talk to the judge about whatever steps the association took to try and collect. Maybe the judge will be inclined to tell the owner to take the payment plan seriously or the case will be tossed and he/she will lose the home in chapter 7. If you're really lucky, attorneys from the bank will also be there and you can give THEM a piece of your mind about failing to pay assessments on the homeowner's behalf when there's language in the mortgage agreement addressing this. That's one thing I never got to do dealing with the jackass in my community, but maybe the bank soon saw the light. The woman is still an owner, but I haven't heard anything about delinquencies, so I hope the mortgage company stepped in and increased her payments so it'll be covered.

This is why I'd love to see superliens as Cathy mentioned
GeorgeS21
(Florida)

Posts:1481


07/27/2019 9:43 AM  
Thank you for all the replies.

I read up on Chapter 13 bankruptcy - this COULD be a successful way for everyone to get paid, but I'll bet in most cases it doesn't end well for the HOA/POA.

Oddly, the property owner sent the Board a note in response to our continued efforts to document the violations, stating we should stop bothering her as the bank owned the property now. Clearly, the bank does not own the property as she filed Ch 13, stopped the foreclosure action, and has a Sep 19 court date - at which the judge will probably negotiate repayment with her ... UNLESS, she drops it and moves on.

BTW - the property owner noted in her filing that she owes the POA for last two years of assessments.

So, in my meeting with our attorney, I should probably ask if there is a cross claim we should be filing - AFTER I explained I don't want to go down a legal rabbit hole on attorney fees when the probably is low we will get anything for it ...

Given my fiduciary responsibilities, should I authorize whatever legal action is possible without respect to the actual cost - give we are down the list for repayment? Wait till after the Sep 19 court discussion? Do we need to cross file to have access with standing in the court cases?
NpS
(Pennsylvania)

Posts:3913


07/27/2019 10:25 AM  
Posted By GeorgeS21 on 07/27/2019 9:43 AM
I read up on Chapter 13 bankruptcy - this COULD be a successful way for everyone to get paid, but I'll bet in most cases it doesn't end well for the HOA/POA.



Most 13s get converted to 11s (only those with highest priority get paid).

Posted By GeorgeS21 on 07/27/2019 9:43 AM
BTW - the property owner noted in her filing that she owes the POA for last two years of assessments.



If she failed to list it, the bankruptcy court wouldn't be able to discharge the debt, and you could still collect it from her personally.

Posted By GeorgeS21 on 07/27/2019 9:43 AM
Do we need to cross file to have access with standing in the court cases?



Check with your attorney but probably not if the debt is listed properly on her schedules.

Also, check with lawyer if you can fine her now for things that occurred after the date that she filed for bankruptcy. The bankruptcy filing does not protect her for debts incurred after the filing date.

Sikubali jukumu. Read all posts at your own risk.
JohnC46
(South Carolina)

Posts:8877


07/27/2019 10:34 AM  
George

You asked about pursuing the issue. The answer is what are the chances of your association getting any money? Strictly an economic decision, not a right or wrong decision.

JZ2
(Florida)

Posts:52


07/27/2019 1:11 PM  
Very rarely will a lender pay the unpaid Association debt of its borrower. Ordinarily, that proves a complete waste of time. However, it doesn't cost the Board anything to try if it sends the notice of default out directly ...
JZ2
(Florida)

Posts:52


07/27/2019 1:18 PM  
You need to timely file a proof of claim (POC) with the bankruptcy court. If the debtor has sufficient income to pay (and he/she should if in a 13 vs. a 7), you will get paid. You might have to wait 5 years until it is all paid, but you should get paid. Additionally, the homeowner must stay current on all association assessment obligations arising after the date of the bankruptcy filing ("post-petition").

Good luck!
RichardP13


Posts:0


07/27/2019 1:24 PM  
Posted By JZ2 on 07/27/2019 1:11 PM
Very rarely will a lender pay the unpaid Association debt of its borrower. Ordinarily, that proves a complete waste of time. However, it doesn't cost the Board anything to try if it sends the notice of default out directly ...



The remedy is part of the PUD rider that the lender provided and the borrower signed.
JZ2
(Florida)

Posts:52


07/27/2019 1:30 PM  
I respectfully suggest that you read it again closely; it says that the lender "may" pay -- not that the lender "shall" or "must" pay.
RichardP13


Posts:0


07/27/2019 5:23 PM  
Posted By JZ2 on 07/27/2019 1:30 PM
I respectfully suggest that you read it again closely; it says that the lender "may" pay -- not that the lender "shall" or "must" pay.



You know, I used to work for the world's largest mortgage company and would come across thousands and thousands of that document over the course of 6 years. As a management company I have actually gotten a few to pay because I actually know how to track who services the loan. I also know what the legal meanings of :may", or "shall". There is NO "must". But thank you for pointing that out!

How many have you gotten to pay past assessments? Maybe you should just follow Ron's "come to Jesus parade" found here: http://www.hoatalk.com/Forum/tabid/55/forumid/1/postid/267836/view/topic/Default.aspx
JZ2
(Florida)

Posts:52


07/28/2019 1:50 PM  
Good for you, but your comment simply reinforces what I am saying ("You know, I used to work for the world's largest mortgage company and would come across thousands and thousands of that document over the course of 6 years. As a management company I have actually gotten a few to pay because I actually know how to track who services the loan.")

I have quite a bit of experience in these matters and know for an absolute certainty that lenders have no obligation to pay anything per the PUD rider; getting "a few" to pay out of thousands and thousands sounds about right....

And, as I also stated previously, it doesn't hurt or cost anything to try.
JohnC46
(South Carolina)

Posts:8877


07/28/2019 4:41 PM  
It all depends on what is costs to ask.
RichardP13


Posts:0


07/28/2019 5:08 PM  
Posted By JZ2 on 07/28/2019 1:50 PM
Good for you, but your comment simply reinforces what I am saying ("You know, I used to work for the world's largest mortgage company and would come across thousands and thousands of that document over the course of 6 years. As a management company I have actually gotten a few to pay because I actually know how to track who services the loan.")

I have quite a bit of experience in these matters and know for an absolute certainty that lenders have no obligation to pay anything per the PUD rider; getting "a few" to pay out of thousands and thousands sounds about right....

And, as I also stated previously, it doesn't hurt or cost anything to try.



Wow, did someone get their panties in a bunch. I reviewed these documents while at Countrywide, not working for any HOA or management company. In looking at my records, I have gotten 12 resolved this way. How many have you gotten, or hell, even tried.
JZ2
(Florida)

Posts:52


07/29/2019 6:56 AM  
Huh? You having a rough day, Richie?

I don't know when you worked for the mortgage company -- and frankly could care less -- but I deal with this issue on a regular basis as a litigation attorney to many HOAs and condo associations in Florida (and have for many years) and it is very rare for a lender to pay the Association for the accrued debt of the homeowner-borrower.

Since the OP indicated that the Association was in FL, I submit that my current, state-specific reply is more credible than your dated statement.

RichardP13


Posts:0


07/29/2019 8:01 AM  
And I could care less you're a, what, litigation attorney? I don't have a high opinion of any attorney and I am sure your bag of trick have worked wonders for your client.

Have a blessed day!
JZ2
(Florida)

Posts:52


07/29/2019 4:01 PM  
//And I could care less you're a, what, litigation attorney? I don't have a high opinion of any attorney//

If you can't appreciate the value of an experienced, honest legal advisor, then there's no point in attempting to converse with you, sir. I wish you well.
RichardP13


Posts:0


07/29/2019 5:23 PM  
Posted By JZ2 on 07/29/2019 4:01 PM
//And I could care less you're a, what, litigation attorney? I don't have a high opinion of any attorney//

If you can't appreciate the value of an experienced, honest legal advisor, then there's no point in attempting to converse with you, sir. I wish you well.



I don't know, so I would have no idea if you were honest.
GeorgeS21
(Florida)

Posts:1481


08/02/2019 3:31 PM  
JZ,

Thanks for your insight.

Met with our counsel. Property owner has listed HOA debt, so will wait for September court outcome.

Our management company failed to push to lien prior to the Ch 13 ... previous Board didn’t monitor closely enough.

I think we’ll go to a process where we lien at 6 months vice 14-15 months.
JohnC46
(South Carolina)

Posts:8877


08/02/2019 4:06 PM  
Posted By GeorgeS21 on 08/02/2019 3:31 PM
JZ,

Thanks for your insight.

Met with our counsel. Property owner has listed HOA debt, so will wait for September court outcome.

Our management company failed to push to lien prior to the Ch 13 ... previous Board didn’t monitor closely enough.

I think we’ll go to a process where we lien at 6 months vice 14-15 months.




The sooner you lien, the better.
PestY


Posts:0


08/03/2019 7:40 AM  
The sooner you RECORD the lien the better.

(the lien already exists as per 'most' CCRs)
JohnC46
(South Carolina)

Posts:8877


08/03/2019 10:03 AM  
Posted By PestY on 08/03/2019 7:40 AM
The sooner you RECORD the lien the better.

(the lien already exists as per 'most' CCRs)




I agree.
JZ2
(Florida)

Posts:52


08/03/2019 12:24 PM  
//JZ,

Thanks for your insight.

Met with our counsel. Property owner has listed HOA debt, so will wait for September court outcome.

Our management company failed to push to lien prior to the Ch 13 ... previous Board didn’t monitor closely enough.

I think we’ll go to a process where we lien at 6 months vice 14-15 months.//

Generally speaking, and as others have noted here, the earlier you record the lien, the better.

Having said that, it is also wise to look at the amount of superior priority debt encumbering the property before you pull the proverbial trigger. If the property is worth less than the amount owed to the superior lien holder, i.e., typically, an institutional first mortgage holder, then it matters little whether your Association records a lien against the property.

If there is insufficient equity in the property, i.e., the fair market value of the property is less than the first mortgage debt owed on it, together with interest, any unpaid real estate taxes and attorney's fees incurred by the first mortgage lender (the total amount of which is memorialized in the mortgage lender's proof of claim), your lien would be subject to being "stripped" in a chapter 13 proceeding.

Hopefully, your counsel explained this to you when you had your consultation.
JZ2
(Florida)

Posts:52


08/03/2019 12:28 PM  
I should probably also add: if your lien is stripped off by the bankruptcy court, the pre-petition debt owed to your Association will be treated as unsecured and you will typically receive pennies on the dollar.

The good news, however, is that a homeowner who has filed a chapter 13 bankruptcy (vs. one under Chapter 7) has the obligation to pay all assessment obligations arising after the filing date of his or her bankruptcy petition.
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