HOAs and Foreclosures

Good topic and I'm glad to see it will be run through the state. Here are some more suggestions:

What to do when the lender doesn't take title. The owner walks away, or the lender forecloses on the mortgage, but doesn't take title. Happening more and more as property values fall below mortgaged amounts.

How to collect from institutional owners. There have been many stories in the news and some posted here, that when the foreclosing party takes title, they still don't pay assessments, even current ones.

What happens in a new development that is only partially occupied and the developer is foreclosed on.

What happens if you're a renter in a condo or HOA and your landlord is foreclosed on

Communicating with the owners about the loss of revenue reulsting from foreclosures and how the association is going to deal with it.

Maintaining a unit in foreclosure - foreclosed units have become places for vandalism, break-ins, mortgage companies have boarded them up, yards have been left to trash and weeds - dragging the entire building or neighborhood down. How to prevent that.

If I think of some more I'll add them

Joe

JanP1: I am curious--for what purpose is the class being given???

I do read it is being offered through the Real Estate Division, but will the class be geared to entice prospective buyers to buy in an association community? Or, is it geared to builders/developers for legal filing as an association? or, is it for Assn. Board members?

Sorry for the questions, but think it is a good concept and could do much to educate prospective community association buyers to know what they are buying into.

Jan,

You stated that when the property is sold, Nv. banks do not have to provide the CC&Rs, etc? Holy cow, someone should be responsible to transfer them with a sale of a HOA property. Enforcement of the governing documents is not something that a bank or lending institution should have any say in. We are required by law to transfer these docs to all and every new owner. It's a Real Estate Law. Closing agents know that docs must be signed by new buyers. Closing papers should have made a copy and then charge a buyer to receive them, no questions or if ands or buts.

Donna,

Very few states have laws covering any kind of disclosure for condos or homes in HOA's. In most states the real estate lobby is much stronger than the comunity association lobby and doesn't want anyone other than a real estate agent working with a buyer and seller. They're afraid the association would (might) screw up the deal. That's why I've continually cautioned associations not to provide the documents or any other information directly to a purchaser (unless they have a disclosure law) - only through the owner/seller or their agent, or at their direction. Unless they can beat the real estate lobby in Nevada, it's going to be tough to get the disclosure law that is needed.

Joe

Joseph,
You discussion suggestion "What happens in a new development that is only partially occupied and the developer is foreclosed on." Is so timely - just happened here in a high profile association. So do you have any suggestions for board members in this situation, and question they should ask or issues they should research?

The problems that would arise from a developer going bankrupt or being foreclosed on before transition to owner control are so varied and large that the only real sound advice would be for the owners to get together and find a real good attorney as fast as possible. They may have to do this separate from the association, possible forming a legal entity in order to divide up the costs, which will be separate from the association costs. Why? They're going to need an expert to find out:

Who's in charge? The developer probably defaulted to numerous entities who financed the development; someone will ultimately end up on top, but you don't want to deal with anyone else until that's been decided.

What happens to the assessments? There's probably nothing in the association's bank accounts as developers still in control don't want high assessments; or they dipped into the association funds when trying to survive. Someone has to find out where the money is and try to keep it safe.

You're still obligated to pay assessments, but to whom and why? You don't want to throw money into a bottomless pit, but you also don't want to be in violation of the docs (which can complicate things even more). Perhaps your attorney can petition the court to set up a trust fund to manage the money.

Who owns what? If there are unsold lots, what is going to happen to them and how will that affect you. How will that affect the common areas. If its a high-rise, usually the building is pretty much finished before the first owners move in, but now that no one is selling the balance of the units, how will that affect the costs of maintaining the common areas, paying the electric and water bills etc.

Who's paying the bills? Especially if you have common water or electric. How about insurance, is it still in place?

Were annual corporate and tax reports filed? Are you still a legal entity?

Have vendors placed any construction liens on the property and how does that affect you?

This is just the tip of the iceberg, which is why you would need someone familiar with state laws, associations and bankrupties/foreclosures sorting it out for you. It won't be cheap, but maybe the attorney can help you figure out a way to re-coup some of the costs down the road.

Joe

Just came up with another story in the valley from a few years ago. Developer built in all the amenities - clubhouse, gates, lush landscape, etc., sold only 1/3 of the homes went bankrupt... Those folks had to pay for everything. Management companies donated their services, but no one was happy as 1/3 of the pro-forma number of unit owners had to pay for everything to sustain the community for 2 years until a new developer came in.

So what do you do in that case in the long term for those who have carried the support of an abandoned community? - Ouch - What is fair and ethical?