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Subject: Florida - automatic collection of one year of HOA/POA assessments in arrears at foreclosure
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GeorgeS21
(Florida)

Posts:1281


09/03/2019 9:08 AM  
Hi All,

Subject property in our neighborhood of 314 single family homes. Bank foreclosing, but stayed by owner filing Chapter 13 bankruptcy. The Ch 13 is odd, as the owner continues to state the bank owns the property and to stop talking to them. We continue to send them notices. Ch 13 hearing set for this month.

Previous president decided to not file lien for the two years of owed assessments, as the house was in foreclosure - not sure why the previous board waited so long to file a lien. In any case, he said he was because attorney said we would not get anything due to the value vs what was owed. I'm cool with this as a strategy, given the condition of the house, etc.

Then the previous president said the property manager said if there was money left after the bank took the house, the HOA/POA would receive a year's assessment automatically.

This doesn't sound reasonable - on the other hand, I'm new to this part of the game.
JohnC46
(South Carolina)

Posts:8647


09/03/2019 9:27 AM  
Basically a lien has to be cleared before property can be sold. That said, in the case of a bankruptcy/foreclosure the question will be is there enough money to pay off all liens? The answer is usually no but one never knows so filing liens is the best policy just in case.

GeorgeS21
(Florida)

Posts:1281


09/03/2019 9:43 AM  
John,

My thought, as well, but given what we apparently know, there will be zip money left over.

However, setting that aside, I would looking for comments on the property manager's response that the association would automatically get one year if funds are available.

It's the "automatic" component - meaning without a lien, just based on the estoppel letter.
NpS
(Pennsylvania)

Posts:3655


09/03/2019 10:25 AM  
Hi George

You should definitely speak with an attorney, but here's a few pointers:

1. Chapter 13s require the debtor to provide a plan to repay the creditors. By contrast, Chapter 7s pay off only the creditors who have highest "priority" until the money runs out. Most Chapter 13s never complete the repayment plan and get converted to Chapter 7s. No matter what the filing (13 or 7), the debtor must file schedules with the bankruptcy court. Those are public documents. You should get copies. See what those docs say about the debt obligation to the HOA.

2. The Bank may control the property, but the bank doesn't own it until the foreclosure is completed. In your case it was stayed by the bankruptcy, so the bankruptcy filer is still technically the owner.

3. Due to the bankruptcy stay, you can't attempt to collect on the pre-filing debt. But you can attempt to collect for debts incurred after the bankruptcy filing. If bankruptcy was filed 2 years ago, that's 2 years of post-filing debt. Then again, if the owner has no money, you're SOL.

4. The mortgagee typically has higher "priority than the HOA. Your CC&Rs probably state that. However, many states have statutes saying that there is a fixed number of months of HOA payment on debts that have higher priority. In PA, it's 6 months. Since your prior pres said 1 year, that's probably what the FL statute says, but you should verify it.

5. After the foreclosure, PA law allows us to collect 6 months from the proceeds. That 6 months is calculated backwards from the date that the foreclosure sale goes through. We can also start collecting immediately after the foreclosure from the new owner. PA statute allows us to include fines, late fees, interest, and legal fees. Because the house usually isn't being properly maintained, we start loading up the house with fines for not maintaining the house to HOA standards. The daily fines and everything else gets tacked on. Monthly charges can legitimately wind up being double normal monthly fees.

6. You should learn what FL law says about what fees are allowed during the 1 yr period. Then maximize your recovery by figuring out what fees you can load on.

7. This is not a passive activity. You don't control when the house gets foreclosed, so you should try to time such things as legal fees so that the bulk of them fall within the HOA recovery period under FL law.

Best.

Sikubali jukumu. Read all posts at your own risk.
RichardP13


Posts:0


09/03/2019 10:59 AM  
The PM might have a point. There is case law that has awarded a Florida Condo monies left over to cover assessments, based on provisions of 718 stating that Florida condos already have a statutory lien in place based on the recorded on the initial CCRs. It may hold true for homeowner association under 720 depending on when the CCRs were initially recorded.
LetA
(Nevada)

Posts:771


09/03/2019 11:09 AM  
Since the Nevada HOA foreclose law changed two years ago, HOA are still a super priority , but the HOA must first notify the mortgage lender first of their intent to foreclose. Then the bank cuts a check to the HOA for nine months of assessments.
CathyA3
(Ohio)

Posts:396


09/03/2019 2:22 PM  
Posted By GeorgeS21 on 09/03/2019 9:08 AM
Hi All,

Subject property in our neighborhood of 314 single family homes. Bank foreclosing, but stayed by owner filing Chapter 13 bankruptcy. The Ch 13 is odd, as the owner continues to state the bank owns the property and to stop talking to them. We continue to send them notices. Ch 13 hearing set for this month.

Previous president decided to not file lien for the two years of owed assessments, as the house was in foreclosure - not sure why the previous board waited so long to file a lien. In any case, he said he was because attorney said we would not get anything due to the value vs what was owed. I'm cool with this as a strategy, given the condition of the house, etc.

Then the previous president said the property manager said if there was money left after the bank took the house, the HOA/POA would receive a year's assessment automatically.

This doesn't sound reasonable - on the other hand, I'm new to this part of the game.




I thought that once an owner filed for bankruptcy, all collection activity has to cease. ????

When a bank filed for foreclosure on a home in my community, we had our attorney file a cross claim (basically a legal notice that the association had a claim on any money that was left after the bank was paid off). I don't think that the association would automatically be paid without this notice.
RichardP13


Posts:0


09/03/2019 2:34 PM  
Every state may or may not have different rules in dealing with HOA foreclosures. Florida attorneys suggest to these clients to file Chapter 13 to throw a wrench into the works. Many states have super lien priorities which I think is BS.
NpS
(Pennsylvania)

Posts:3655


09/03/2019 8:59 PM  
Posted By CathyA3 on 09/03/2019 2:22 PM
I thought that once an owner filed for bankruptcy, all collection activity has to cease. ????


See the 3rd point in my earlier post.

Sikubali jukumu. Read all posts at your own risk.
NpS
(Pennsylvania)

Posts:3655


09/03/2019 9:01 PM  
Posted By RichardP13 on 09/03/2019 2:34 PM
Many states have super lien priorities which I think is BS.


Personal opinions on what the law should or shouldn't be are irrelevant. Either state statutes allow super lien priority or they don't.

Sikubali jukumu. Read all posts at your own risk.
JZ2
(Florida)

Posts:52


09/04/2019 5:10 PM  
Unless you have verbiage in your Declaration to the contrary, that comment is likely accurate.

Look at Section 720.3085(2)(a)-(c), Fla. Stat., George. It currently provides that:

//(2)(a) A parcel owner, regardless of how his or her title to property has been acquired, including by purchase at a foreclosure sale or by deed in lieu of foreclosure, is liable for all assessments that come due while he or she is the parcel owner. The parcel owner’s liability for assessments may not be avoided by waiver or suspension of the use or enjoyment of any common area or by abandonment of the parcel upon which the assessments are made.
(b) A parcel owner is jointly and severally liable with the previous parcel owner for all unpaid assessments that came due up to the time of transfer of title. This liability is without prejudice to any right the present parcel owner may have to recover any amounts paid by the present owner from the previous owner. For the purposes of this paragraph, the term “previous owner” shall not include an association that acquires title to a delinquent property through foreclosure or by deed in lieu of foreclosure. The present parcel owner’s liability for unpaid assessments is limited to any unpaid assessments that accrued before the association acquired title to the delinquent property through foreclosure or by deed in lieu of foreclosure.
(c) Notwithstanding anything to the contrary contained in this section, the liability of a first mortgagee, or its successor or assignee as a subsequent holder of the first mortgage who acquires title to a parcel by foreclosure or by deed in lieu of foreclosure for the unpaid assessments that became due before the mortgagee’s acquisition of title, shall be the lesser of:
1. The parcel’s unpaid common expenses and regular periodic or special assessments that accrued or came due during the 12 months immediately preceding the acquisition of title and for which payment in full has not been received by the association; or
2. One percent of the original mortgage debt.
The limitations on first mortgagee liability provided by this paragraph apply only if the first mortgagee filed suit against the parcel owner and initially joined the association as a defendant in the mortgagee foreclosure action. Joinder of the association is not required if, on the date the complaint is filed, the association was dissolved or did not maintain an office or agent for service of process at a location that was known to or reasonably discoverable by the mortgagee.//

But also know that the date the mortgage against the home was entered determines the version of that statute that applies (and if the mortgage was entered into before the initial version of the statute was enacted, you default back to Florida common law).
JZ2
(Florida)

Posts:52


09/04/2019 5:13 PM  
//I thought that once an owner filed for bankruptcy, all collection activity has to cease. ????//

It does, Cathy.

What likely happened here is that the Chapter 13 petition does not protect the home but surrenders it to the mortgage lender, and the mortgage lender hasn't yet sought stay relief to file or conclude its foreclosure action.

GeorgeS21
(Florida)

Posts:1281


09/08/2019 7:16 AM  
Bit of an update...

Spoke with our attorney, again ... concur with comments re Ch 13 ... odd to chose Ch 13, but who knows what the owner’s attorney recommended.

Supposed to go to court end of this month ... but likely will just set timeline for negotiations. There may be more than one property in the Ch 13, and our POA’s property may have more than one loan on it. In any case, the largest of the loans is greater than the value of the house.

And .... and ... the property is being taken to a special county magistrate because of its condition - overgrowth, hole in roof ($500k plus house), supposed evidence of mold, etc.

I think all this nets to a loss for the POA ... a shame, but a bit our fault for not liening earlier.

I’m working on a lien policy, that is based on a date certain ... we bill first of December, assessments due NLT January 1, two months of gravy, six months with fees and interest, then turn over to counsel for collection on August 1 of same year. Previous boards discussed with owners, came up with $50 a month payment plans (most failed quickly) waited for two full assessment cycles, then started the lien process at about 20 months after the first assessment was not paid.
MelissaP1
(Alabama)

Posts:8497


09/08/2019 9:37 AM  
Now this may be "controversial" for some people on here, but here is a suggestion. The foreclosure is PUBLIC knowledge. It is to have been published in a PUBLIC resource. So it's no real "secret" that a home or property is in foreclosure by the bank or even the HOA. However, most people don't know this information as it's not always easily to find/access. It's usually posted in the legal section in the newspaper. Considering how newspapers are not published as readily or people buy them, being published "publicly" doesn't mean "widespread".

So if you know the information such as the date/time of the foreclosures, then why not announce it? I don't find anything wrong with ANY HOA member being interested in purchasing the property at a PUBLIC sale. Some member may be able to do a "short sale" arrangement.

The reason for this is that your raising the stakes the property that is in neglect gets sold faster or at all. If someone knows about it, then the more likely they may spread the word to get a new owner in. A new owner could mean the property is taken care of.

Now some people may moan and grown IF a board member buys the property etc... However, the information is PUBLIC and it's not being kept from ANYONE. IF who buys it is an investor or a board member so be it. The property is now sold and dues can be collected again.

Former HOA President
GeorgeS21
(Florida)

Posts:1281


09/08/2019 11:10 AM  
Thanks, Melissa.

Yep - agree and understand.

Given the timeline on this and the inability to gain access to the property, there won't be a short sale. Given the likely continuing degradation of value, and the likely time extension as the legal arguing moves forward, I suspect whatever sale there is will be after the bank gets the property and repairs it.
MelissaP1
(Alabama)

Posts:8497


09/08/2019 12:08 PM  
Now be aware each state has a "Right of Redemption" period. It varies to none to up to a year. So the foreclosure after completed can take that time for someone to fix up the property. That period of time means that the original owner can get the property back by paying what they owe the bank and/or the HOA. Improvements a new owner may make may not be included. So most people including the bank may hold off till the right of redemption period ends to touch the property.

Think many people don't understand this part of the process. It's another reason I encourage finding out when the foreclosure sale is to be and get a buyer for it. The owner even though can't touch the property still needs to start paying the dues. Florida is a stranger state on that it may allow the new owner to pay the past owner's debts to the HOA. Not every state allows this.

Also a foreclosure situation there is no owner to officially turn over the HOA documents. Some states require the former owner to give them at closing. There isn't a normal closing at a foreclosure. Even though the CC&R's and Article of Incorporation are PUBLIC documents, it still may be a good idea to make up a package.

If a foreclosure sales doesn't get a buyer, it could then become a HUD foreclosure. Which is a Tax one. Those are the kind those "Get rich" schemes you see on TV snatch up.

Former HOA President
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Forums > Homeowner Association > HOA Discussions > Florida - automatic collection of one year of HOA/POA assessments in arrears at foreclosure



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