HOA foreclosure to force the lenders action

Started by RobertR5 • 98 replies • 17380 views

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RobertR5 (Florida)
Posts: 1

Posted:

To all HOA's and Condo Associations
Recently, our property managment company made the suggestion to us, the homeowners association, that because banks and lenders were now taking much longer than previously to get through the legal process of foreclosure, that instead of waiting on the banks or mortgage lenders action to foreclose on the unit in default, that the association do its own foreclosure against the unit to take title...and force the banks or lenders hand to quicker action. It was then suggested that in the time that the association held title to the unit, the association could rent out the unit to recover some part of it's delinquency on the unit, minimizing it's losses.

The Property Management Company and the Attorney had met and were recommending this strategy to all accounts of the Property Management company, stating that this was the direction that all associations were now going in.

A word to the wise. DO NOT ACCEPT EVERYTHING YOUR PROPERTY MANAGER OR LAWYER SUGGESTS as gospel until you drill down and do the research for yourselves. The devil is always in the details. Here are a few things to consider about this strategy...

1. Cost of repairs and cleanup going in and making ready for rent.
2. Cost of maintenance of appliances.
3. Ongoing maintance costs while unit is rented, plumbing, electrical, AC, etc. 4. Cost of repairs and cleanup when unit vacates in order to sell unit.
5. Disclosure of code deficiencies since the unit was built...i.e plumbing/electrical, and upon sale becomes the associations responsibility to either either disclose or bring up to code.
6. Disclosure of foreclosure status to prospective renters would limit interest in unit as any tenant would have to immendiately vacate upon sale of unit. These units are going to be difficult to rent for a short period of time.
7. The association would have to purchase a separate insurance policy for hazzard, windstorm, flood, etc for each unit as the master policy most likely does not cover units. This could cost $1000/unit. In the event of fire or flood or windstorm, the board would be liable for damages and repairs and could not take the financial risk of renting out a unit with out a separate unit policy.
8. In the event the lender should foreclose the association just shortly after the association forclosed the unit owner and took title, the association may not make adequate $$$recovery and could spend thousands of dollars or more in dealing with the additional expeses.

Just a word to the wise....rsr.

SheliaH (Indiana)
Posts: 6,963

Posted:

Thanks for the tips. In our HOA, most of our foreclosed units were taken by the mortgage company and the homeowner had already moved out.

We haven't had a situation where there was a tenant living in a foreclosed unit - if we did it, I would think we'd ask the tenant to send his/her rent payments to us so they'd be applied against the unpaid balance. This way, some money's coming in and there's nothing like an income cutoff to get a delinquent homeowner's attention....

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

GeorgerwilliamsW (Indiana)
Posts: 975

Posted:

Quote:

Posted By SheliaH on 02/16/2009 8:32 AM, I would think we'd ask the tenant to send his/her rent payments to us so they'd be applied against the unpaid balance. This way, some money's coming in and there's nothing like an income cutoff to get a delinquent homeowner's attention....

If the association did that without a court order, Sheila, the association would be guilt of fraud and conversion under Indiana statutes.

AnneM2 (North Carolina)
Posts: 30

Posted:

RobertR5 - Good points but you didn't mention any outstanding mortgage amount. If the HOA forclosed, wouldn't they then assume any mortgage debt?

RogerB (Colorado)
Posts: 5,067

Posted:

Robert, I believe your HOA would want to buy a property unless it was an excellent investment and a last resort. Why not do everything possible to get the mortgage company to initiate foreclosure? And if they don't, the HOA could try to sell their lien and the buyer of the lien could then initiate foreclosure. In Colorado there are HOA attorneys which facilitate selling of an HOA's lien.

RogerB (Colorado)
Posts: 5,067

Posted:

correction- I CANNOT believe ....

JanK1 (Arizona)
Posts: 6

Posted:

Hi Robert: Our association had a similar situation, and I wondered if our HOA pressing it's own foreclosure would have brought the lender to the table quicker. In this case, yes I think the BANK would have reacted quicker. The reason being: they were capitalized well over what the property will sell for today. The problem with this home, is that is "non-liveable" (torn down to block walls, no dry-wall, and the Seller claimed to have left the home for "mold."

In our case, I think the HOA would have forced the Bank to the table at least a year earlier; not that they want to be in the real estate or foreclosure business, but the bank would have stepped in to secure their very large senior mortgage. This would have put the property BACK on the market at least a year ahead of the continuing decline. Today we are going to probably realize at least another 10-15% decline when the property resales. If we had prompted an earlier sale with the BANK we would also be able to negotiate with the new owner for dues going forward (at an earlier date), and also other late fees, transfer fees, etc.

So I say that every situation, is different, and you have to look at all the details. I realize that an HOA truly doesn't want to be in the real estate or disclosure business, but that it may protect the homeowners values to push the Bank to step in at an earlier date.

One thing we did find out is that the lien (late HOA dues) should be separated from late fees and legal fees in the filings. One should be a lien and the other a personal judgement. Also probably as the lien grows over time, it should be updated to the current amount due the HOA.

JK

RobertR1 (South Carolina)
Posts: 5,164

Posted:

Very interesting JK,
I agree with most, the Homeowners of any association (with rare exception) should not be in the real estate business. I was really relieved to see Roger correct his post (with a "cannot"). I would offer one more reason to stay away from association ownership and I may be biased. It is my considered opinion this business of running and managing an association is not something, we, as a collective restrictive means of government is something we do particularly well.
Seems to me we have a lot of problems with just about all facets of running a place smoothly and efficiently. Throw in a management company or a manager that does their job well sometimes but certainly not well all the time, and then the association takes on the job of supplying all the administrative expenses of just the day to day normal tasks that will be demanded, and you are talking additional expense.
JK: Explain some more about the differences between late fees and legal fees in the filings. Could a personal judgment be used by an association as stand alone, without late fees as such, and effect the action of placing the HOA a priority position at foreclosure.

For Robert: Good post and fair warning. This is also another reason I do like like a HOA to be connected to a Real Estate office and especially through a M/C.

PeterB1 (Florida)
Posts: 257

Posted:

Perhaps I have missed the point of this thread. I want to believe that the HOA is interested in recouping unpaid dues - not in the posesssion of real estate!

We currently have 2 properties that are in foreclosure - both more than 6 months. Both owe significant dues (12-26 months worth). We don't see those dues coming to us anytime soon. We are beginning a different process in the attempt to capture our dues, fees, and attorney fees.

Next week we will begin a 'summary judgment' process to attempt to get our money from whatever assets the individuals may have (bank accounts, vehicles, etc). We have not done this before, but we need the money.

peter

RobertR1 (South Carolina)
Posts: 5,164

Posted:

Peter,
The original intent of the post sometimes gets difussed as time marches on. Your post is pertinemt and important and it sounds like you all are doing the best you can, and doing it well.

I would ask that you elaborate a little or a lot about the procedural steps you take to get you to where you are at now.

As you can see, one size doesn't fit all when associations are concerned and posters have specifics that they seek answers about. If folks like you would be so kind as to play the experts for a couple of posts, we could maybe help some more people.

I goes without saying, as much as we dream about things getting better economically, it is going to be slow and painful. Sharing is a good way to help others whether that be with material items or sharing knowledge.

Thank you.

BryanG1 (Florida)
Posts: 43

Posted:

Unfortunately in the state of Florida, HOA's no longer have the right to foreclose on a property.

RobertR1 (South Carolina)
Posts: 5,164

Posted:

ByranG,
What specific post does this message reference?
Thanks.

EllenS1 (Florida)
Posts: 1,148

Posted:

Bryan,

Can you cite the statute that covers this? It's the first I've heard of it.

SheliaH (Indiana)
Posts: 6,963

Posted:

GeorgewilliamsW - yes, I'm aware of that. Since I've been on the board, we've had one or two cases where we asked the court to garnish the owner's rental fees to apply against the unpaid balance. However, in this state, it appears the sucess of this happening depends on whether or not the tenant signs the paperwork from the court. If he or she doesn't sign, we have to find another way to grab the money.

Hm, maybe that should part of a law that could help tenants who get caught up in the crossfire of a foreclosure - require the mortgage company to go to court and ask the tenant pay it instead of the homeowner (based upon the current lease) - this way, some money's coming in and the tenant doesn't have to move out at a moment's notice. Of course being a HOA board member, I'd also like to see some language that ensures assessments are paid - a point I made recently in a letter to the state legislators as they mull over what to do about Indiana's foreclosures.

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

BryanG1 (Florida)
Posts: 43

Posted:

I was thinking of fines when I replied...

HOA's can't foreclose on a property based on non-payment of fines. They can, however, foreclose for non-payment of dues.

My bad...

EllenS1 (Florida)
Posts: 1,148

Posted:

Bryan,

Thanks for clarifying that. I was certain a property (since it is homestead) could not be foreclosed for anything OTHER than non-payment of assessments. We have a judgment against a property owner for repairing her property, plus legal fees in excess of $20,000 and cannot foreclose on that since it is her homestead. What a waste of attorney fees...we now have to see if there is anything we can take, bank accounts, etc...it doesn't look good.

This may sound cruel but it appears, since this is an elderly woman, we will have to wait for her estate to pay us. She was given all sorts of opportunities to repair her property which would have cost about $6,000 and she is as wise as a fox. The association even offered to pay for the repairs and accept monthly payments. After two years of lies from her, mediation, etc we went to an attorney when we could have just gone to the City who would have fined her $100 per day after being notified she needed to repair her property. My advice...when faced with this sort of thing do not run to an attorney but first call code enforcement and try everything before incuring huge legal fees. This attorney knew this was homestead property but went ahead anyway to rack up big legal fees to get a meangingless judgment.

I feel better now that I have vented.

KirkW1 (Texas)
Posts: 1,665

Posted:

To be sure you need to look into any advice given you and keep in mind that the laws applying to you are not the same as to others on this board. Personally, I am not above looking up the person's lien to see how much was borrowed how long ago. If the only lien were quite small in reference to the property value, then perhaps. But most of our places have a large loan value in comparison to the property value.

EllenS1 (Florida)
Posts: 1,148

Posted:

Kirk,

I am totally confused by your post.

KirkW1 (Texas)
Posts: 1,665

Posted:

Ellen,

My intent is to point out that the laws concerning what an HOA can and can't do vary widely. To be more specific just because an HOA in one locality managed to rent out a unit between their foreclosure and the bank's doesn't mean it will work for yours if you are in a different state.

But also one should keep in mind that management companies may not always give the advice that is best for the HOA. The reality is that a plan to foreclose and then rent out a unit could pose a nice financial gain for the management company while leaving the HOA with all the risk. At least in my situation the management company would stand to make money every step of the way.

EllenS1 (Florida)
Posts: 1,148

Posted:

Kirk,

I am definitely with you re management companies. Some are great but unfortunately there are others to be aware of if for nothing more than their lack of education. Just because they obtained a license doesn't mean they know what they are doing.

RickW (Illinois)
Posts: 169

Posted:

We currently have 3 units out of 56 in foreclosure.

One has for been going on for over 2 years. He was not paying his mortgage or his assessments well before the housing market and the economy tanked. I don't have proof, but would bet that he can afford to pay. He has a good lawyer and always seems to get the judge to agree to some reason for extending this out. He owes over $5000 to the association alone and that is after he paid $3000 a year ago when we forced eviction. He hasn't paid a thing since. We tried for a second eviction but the mortgage company got involved and the judge would not issue an eviction. We now are trying to garnish his wages for past assessments. It's just one way of attempting to collect.

Another unit owes over $5000, has not paid in assessments in over a year. The owner moved out, has tried to sell, but has not been able to do so. This unit is also in foreclosure and we have an eviction/order of possession set to take effect this week. We are hoping either to force the mortgage company into action or rent the unit out in order to collect past assessments. I agree that as an association, we should not be in the real estate business, however, the unit is in good shape and we need to begin doing something to get the money due to the association. Also, in this instance, we are not forcing someone out of their home, they have already moved out.

The third unit in foreclosure is more recent. They are trying for a short sale and a sheriff's foreclosure sale is scheduled for May. Here, we are kind of sitting back, waiting to see what transpires. This instance seems most like a owner who got caught in the breakdown of our economy and we, as an association would rather work with them than evict them.

There are a few legal ways of handling these types of situations. All of them require time and attorney fees. While we can complain, the best thing for all of us to due as board members is to stay on top of delinquincies as best we can and begin to look at ways of decreasing our costs. I don't see things turning around for quite some time.

KirkW1 (Texas)
Posts: 1,665

Posted:

Quote:

...Another unit owes over $5000, has not paid in assessments in over a year. The owner moved out, has tried to sell, but has not been able to do so. This unit is also in foreclosure and we have an eviction/order of possession set to take effect this week. We are hoping either to force the mortgage company into action or rent the unit out in order to collect past assessments. I agree that as an association, we should not be in the real estate business, however, the unit is in good shape and we need to begin doing something to get the money due to the association. Also, in this instance, we are not forcing someone out of their home, they have already moved out. ...

Rick,

I would be surprised if you recover what you spend on the action let alone the back dues. In addition, you should consider the impact your actions will have on an innocent renter should you get the foreclosure. You really have no idea how long it will take the bank to take the property once you possess it. Thus the renter may be in the house only a week or two. Then again, it could take several months. At any rate, unless you tell the renter up front what is going on you have done them wrong. If you do tell them up front it will reduce what you can get for rent.

By the way, you don't know what the current owner will do when they go to move out. It is pretty common for them to trash the place. You could end up fixing things up for the bank.

RickW (Illinois)
Posts: 169

Posted:

Quote:

Posted By KirkW1 on 03/01/2009 1:37 PM

Hi Kirk,

We've looked into this situation with our attorneys. The legal fees we have incurred are charged back to the owner, thus, they become collecitble from rent just like past assessments. We might never collect but we need to try something. The attorneys have a lease that we will use for a renter and it would have a 30 day notice to terminate the lease. We definitely will explain this situation to any potential renter. Granted, it will limit who might be interested in renting the unit. We are trying to figure out a way of finding a couple or young family who have lost their own house and need a place to rent. We then would offer it at a cost less than normal for the area. Even better, we hope the mortgage company sees what we are doing and will make some movement.

The owners have longed moved out, they have been in foreclosure for a year, so I doubt they'll be back to trash the place. They've not been around in 18 months.

RickW (Illinois)
Posts: 169

Posted:

I thought I'd follow-up on where we stand. We have in fact taken possession of a unit in our complex and have successfully rented the unit. We incurred some costs we didn't anticipate such as bringing the water bill current, replacing sump pump, repairing furnace, etc. All of these charges have been added to the amount the association can re-coup by rneting out the unit.

We've had the unit rented for 3 months now. We purposely charge a low rent due to the fact that we have a 30 day temination clause in the lease in case the mortgage company steps in to take over the unit. We've not heard from the owner, bank, or mortgage company in any way.

We haven't collected enough to cover all of the back owed assessments, but we are working in that direction.

GloriaM (North Carolina)
Posts: 829

Posted:

RobertR5

Going back to your original posting; this was bad advise coming from your PM and attorney. All of the issues you itemized for HOA's to think about are correct and the taxes and the mortgage as well.

The bank is only going to come behind the HOA and take over the foreclosure and wipe out everything you did; unless you can negotiate with the bank to take over the proceedings that you have already initiated and get paid by the bank.

HOA's unfortunately always get the short end of the stick when it comes to bankruptcies or foreclosures. Perhaps we should write Washington DC officials and say we are not going to take it anymore......

RickW (Illinois)
Posts: 169

Posted:

Quote:

Posted By GloriaM on 08/12/2009 3:38 PM
RobertR5

Going back to your original posting; this was bad advise coming from your PM and attorney. All of the issues you itemized for HOA's to think about are correct and the taxes and the mortgage as well.

The bank is only going to come behind the HOA and take over the foreclosure and wipe out everything you did; unless you can negotiate with the bank to take over the proceedings that you have already initiated and get paid by the bank.

HOA's unfortunately always get the short end of the stick when it comes to bankruptcies or foreclosures. Perhaps we should write Washington DC officials and say we are not going to take it anymore......

Gloria,

I don't think you can sat the PM and attorney necessarily gave Robert R5 bad advice. I feel strongly this is an individual decision the board of directors needs to make on a unit by unit basis.

As I stated above, we are now heading into our fourth month of renting one of our units. We are beginning to recoup back assesements and get some return on our actions.

However, there are several aspects the board of directors need to look at before making such a decision. We knew from past experience, the owner was absent and we knew the mortgage company was moving very slowly to take action. We also knew the unit was only about 8 years old, so it being in bad shape was unlikely. We also did not need to have the local building department make any sort of inspection prior to renting the unit.

In Illinois, the present insurance the association has covers us and the renters agreed to our request to take out renters insurance and provide us of proof of such insurance. We did not take ownership, we did file an order of possession and was granted this for purpose of renting the unit to collect owed money. Once, we have recouped our money, we will have to turn the unit back over to owner/mortgage company. Therefore, we are not responsible for property taxes.

We were not legally obligated to give any foreclosures regarding the construction or condition of the unit. The renter obtained utilities in their name, so we are not liable for them either.

We did incure the cost of settling with the local village for back water bills and we did incur some repair costs. But, we also had some idea going into this that repair costs would be minor in comparison to what was owed in back assessments. Yet another argument for a case by case decision.

All in all, I would say our experience has been good, we still have a lot to collect to break even, but we are making headway which we were not doing 3 months ago.

I do agree, in general, the HOA's get the short end of the stick with bankruptcies and foreclosures. Kinda like the "we won't pay for preventive medicine" syndrome. By not collecting assessments, HOA's cannot maintain the property which can have an advers effect on property values and hurt everyone in the complex.

This is a complex issue and one that will not succumb to blanket answers or actions.

RobertR1 (South Carolina)
Posts: 5,164

Posted:

Rick,
Would you agree to posting a new thread on the subject of:
Does the BOD of directors have the authority, responsibility, and capabilities to enter into a landlord/tenant relationship with a non-member of the ssociation.
Or words to that effect. It seems to be pretty well established that BOD can charge fees for the use of common property to members. What is questioned at times is does this include charging fees for facilities to folks that are not members. And then we have your situation where the BOD feels they have the authoity to actually take opver a "unit" that is in foreclosure, owned by who knows and develop a income producing business.

I think I posted, more power to you. But Gloria's post and your response have raised some doubts in my mind.

I am not being critical of what you are doing, I think you had all this cleared with your legal council and your state laws. Do other states have similar legislation that allows this.

I amj not sure in SC but it seems unlikely our state would condone this action, they may ignore it, they may tell you, they won't get involved, but in the end the state laws to support this would not be there when push come to shove.

That is just my opinion, nothing more. If this was proposed in my condominium, I would out of hand reject it (for what that is worth), first, because our history does not demonstrate that we have had the management and Board involvement and expertise to handle something like this, not to speak of the legality in SC.

MaryA1 (Arizona)
Posts: 7,043

Posted:

Rick & Robert,

If the assn acquires ownership of a unit/lot and rents it out, that rental income most likely would NOT qualify as exempt function income therefore it would be taxable income. Ref: Title 26, IRS Code, section 1-528-9, (exempt function income) (c) examples of receipts which are not exempt function incomee, (2) amounts received from persons who are not members of the assn.

Frankly, I don't know why the assn would want to become a landlord. The assn can foreclose on a property w/o bidding on the sale. All they should be concerned with is recouping the delinquent amounts owed the assn. Owning the property means maintaining it and paying property taxes on it, which alone could run in the high thousands. Also, where I live the city requires a business license for anyone who rents property and the property taxes are double for rentals. Together with the fact that the rental income will be taxed by the IRS (and possibly the state) it may not be a very profitable venture.

RobertR1 (South Carolina)
Posts: 5,164

Posted:

Mary,
From what has been posted I don't see where ownership is established or of any concern. The BOD just took over the "Unit" and are renting it out to gain money to pay arrears. They apparently moved a tenant into the property, establish a rent schedule and collect it, and have done this with legal adice and I suppose court direction or something. It is all new to me that is why I asked that a different thread be started.

MicheleD (Kentucky)
Posts: 4,491

Posted:

Just curious, because that seems bizarre to me, but how can they "take over" the unit, and then enter into any legal, binding contract with renters, if they don't actually OWN the unit??

EllenS1 (Florida)
Posts: 1,148

Posted:

Robert,

I like a deep thinker. The majority of PMs do not know much and even if they do their main concern is their salary. Another thought, how much equity does the present owner have invested? Of course a title search would show if there are other liens against the property. I'm not certain but in Florida if the property is homestead you may only be able to foreclose for non-payment of assessments. Lots to think about.

RickW (Illinois)
Posts: 169

Posted:

Hi everyone,
I agree this sounds situation sounds rather strange. How can an association take over and rent out a unit without haveing ownership? See below which is a paragraph from an article published by a law firm that contricates to CAN.
I've included a link to the article at the bottom, hopefully the link will work.

As I stated in a previous post, each situation is different, not only in the associations situation of the unit but obviously state laws vary as well. My main reason for posting what we are doing is to give everyone some insight on an option that we have explored. You would need to research your by-laws, state laws, ect. before proceeding with anything like this.

"The Illinois Code of Civil Procedure, Forcible Entry and Detainer Section, as well as the Association’s Declaration and the Illinois Condominium Property Act, if the Association is subject to the Illinois Condominium Property Act, all provide that a Community Association can utilize the remedy of eviction to remove non-paying homeowners from their units. The Association has the right, once the homeowner has been removed, to rent the unit out to a third party tenant and collect rent in an effort to reduce the debt owed to the Association."

http://www.ksnlaw.com/?t=11&la=1175&format=xml&p=1672

MicheleD (Kentucky)
Posts: 4,491

Posted:

Rick:

Wow. Just. . . wow.

0.0

RobertR1 (South Carolina)
Posts: 5,164

Posted:

Rick,
The link worked fine, thank you.

Just a clarification if you would. I would believe you are using contricates the same as you might use contradicts. You mentioned a publication by CAN as contrary. Do you have that link also?

I have read the reference you posted and as most will probably respond I say: "I never knew that."

Are there any other states that have similar laws? There is also reference to the current economic situation which would lead me to believe the act is new, so if you don't mind post when this law was passed in IL. I suspect it may be in what you posted, I just can't seem to spy it.

Do you have any idea who sponsored this Bill? Was it any well known large management or HOA Service Companies? Maybe you know who lobbied for the Bill?

RickW (Illinois)
Posts: 169

Posted:

Robert,

Glad the link worked.

I should have proofread my post, sorry, "contricates" should have read "contributes"!

I tried to find the date at which this was put into law. There is a link on the CAN site, under Illinois to the Illinois Condominuim Property Act. This was effective in 1963. I've begun to read the "Forcible Entry" section that the KSN article speaks of but have not found out if this section is part of the original Act or if it was added after. I'll keep searching and let you know if I find anything out. If I can find out who sponsored the bill I'll let you know that also.

As far as other states having the same or similar Act, I have no idea. I did go to the CAN website and looked under South Carolina. There doesn't appear to be any State link to such a law. You might try to do a search on the state government website.

Rick

RobertR1 (South Carolina)
Posts: 5,164

Posted:

Rick,
Again thanks for replying and considering my interests.

I am just about certain SC doesn't have anything similar for condos and actually have nothing as far as HOAs are concerned. There is active efforts to submit new legislation in Jan again to address some state governmental directions for HOA management. I am no expert but it appears right now to be a mixed bag of proposals. The bill has been drawn up with the input of the Real estate establishments, Developers, Homebuilders and limited input from Homeowners. There is active resistance to some portions of the bill by, among others CAI. I think I can say that some lawyers that are active CAI supporters also helped draft some of this legislation. I certainly can see the rational that CAI uses to find fault within these proposals. However I am uncertain if aside from the objections CAI makes if the rest of the bill is clear.
I would also add I think there is at least one Property Mangers Professional Association that is actively interested.
I really would be more comfortable if there was some real grass roots endorsements of this legislation. I don't see anything in what is proposed that would be similar to your IL property take over conditions.

I also appreciate all the trouble answering my questions will entail. I am trying to connect any new legislation of any state that may influence SC proposals.

In spite of the many difference in state statutes concerning HOA's there is real basic similarities and one state can copy or use the concept of another states legislation. Again all this is just my opinion established only by my experiences and interest.

MaryA1 (Arizona)
Posts: 7,043

Posted:

Quote:

Posted By RickW on 08/19/2009 1:27 PM
Hi everyone,
I agree this sounds situation sounds rather strange. How can an association take over and rent out a unit without haveing ownership? See below which is a paragraph from an article published by a law firm that contricates to CAN.
I've included a link to the article at the bottom, hopefully the link will work.

As I stated in a previous post, each situation is different, not only in the associations situation of the unit but obviously state laws vary as well. My main reason for posting what we are doing is to give everyone some insight on an option that we have explored. You would need to research your by-laws, state laws, ect. before proceeding with anything like this.

"The Illinois Code of Civil Procedure, Forcible Entry and Detainer Section, as well as the Association’s Declaration and the Illinois Condominium Property Act, if the Association is subject to the Illinois Condominium Property Act, all provide that a Community Association can utilize the remedy of eviction to remove non-paying homeowners from their units. The Association has the right, once the homeowner has been removed, to rent the unit out to a third party tenant and collect rent in an effort to reduce the debt owed to the Association."

http://www.ksnlaw.com/?t=11&la=1175&format=xml&p=1672

Rick,

Thx for the link to the article. I read it and have ascertained that the eviction is as a result of foreclosure. I could not imagine an HOA having the power to evict anyone from a home which they own. I believe the info you have posted to be very misleading.

RickW (Illinois)
Posts: 169

Posted:

Quote:

Posted By MaryA1 on 08/20/2009 11:49 AM

Mary,

The eviction is not a result of foreclosure. If the result was foreclosure we would be looking to the entity that took over the unit for payment of assessment. The evicition and order of possession is a result of legal proceedings we undertook because of non-payment of assessments.

Rick

RobertR1 (South Carolina)
Posts: 5,164

Posted:

Rick,
Just so I can get myself straight. Is there a foreclosure process on the place?
Are you then proceeding with the rental while the foreclosure is waiting to close?

You did not evict an owner or a tenant? The owner didn't pay his assessments you went to the courts, and got the right to rent the unit?

Does it make a difference if foreclosure has been requested by the courts? Wouldn't someone have to request foreclosure?

What happens if you are renting the property and the foreclosure process is listed in the legal notices?

RickW (Illinois)
Posts: 169

Posted:

Quote:

Posted By RobertR1 on 08/20/2009 12:41 PM
Rick,
Just so I can get myself straight. Is there a foreclosure process on the place?
Are you then proceeding with the rental while the foreclosure is waiting to close?

You did not evict an owner or a tenant? The owner didn't pay his assessments you went to the courts, and got the right to rent the unit?

Does it make a difference if foreclosure has been requested by the courts? Wouldn't someone have to request foreclosure?

What happens if you are renting the property and the foreclosure process is listed in the legal notices?

Robert,

The mortgage company did file for foreclosure. The last we heard the foreclosure was on hold by the mortgage company, we do not know why.

The owner had already moved from the premises, so technically we did not evict them. Although as I understand it, with our Order of Possession, if they had been living in the unit, we would have been able to evict them. In fact, on the day we took possession, the sheriff was there and did place items on the curb that were left behind.

We are renting the unit out and the lease states has a 30-day termination clause. If the foreclosure goes through, bank takes over the unit, or someone buys the unit, the present tenant will need to be out within 30 days. This is partially why we chose to rent the unit for below market value.

TracieS (Colorado)
Posts: 460

Posted:

This is just the weirdest thing I've ever heard... I need to research more to see if this is in my state...

MaryA1 (Arizona)
Posts: 7,043

Posted:

Rick,

I was trying to find the IL Forcible Entry & Detainer Act but didn't have much luck. However, I did read in the condo statute that the assn can evict, but I'm almost certain it said the members and/or the BOD had to vote to adopt that procedure. Is this what your assn did?

RobertR1 (South Carolina)
Posts: 5,164

Posted:

Rick,
Thanks for your patience in all this. Much appreciated. I can just hear the talk this will generate among those on the Bod and among those owners that have interest.

Since SC is in the process of creating and consolidating their legal interest in HOA's and condo's, I have already sent out some inquires to see if there is anything aking to this proposed in new legislation proposed. I doubt I will get much feedback but my board surely will make some effort to find out, won't they?

RickW (Illinois)
Posts: 169

Posted:

Quote:

Posted By MaryA1 on 08/20/2009 1:38 PM
Rick,

I was trying to find the IL Forcible Entry & Detainer Act but didn't have much luck. However, I did read in the condo statute that the assn can evict, but I'm almost certain it said the members and/or the BOD had to vote to adopt that procedure. Is this what your assn did?

The Board did vote to evict. I think its important here not to concentrate so much on what our association has done. It is important to know that we had the option, but, seriously, this is more than any BOD can figure out on their own. That's why we enlist property managers and legal firms. I'm more than positive every state is different, but maybe there is an option, different than mine, that will help out.

MaryA1 (Arizona)
Posts: 7,043

Posted:

Rick,

I wasn't trying to second-guess what your assn did. I was just hoping to prove to myself that I read the statute correctly.

Frankly, I've not heard of a law like this before. I know this is not an option in AZ and frankly, I'm glad it's not. I don't like the idea of only the board having to vote on something like this. IMO, if it is to be a law the whole membership should be required to vote and I also believe a vote should be required for each time or for at least each year. The point being that members change and this is something that would directly affect the individual member.

RickW (Illinois)
Posts: 169

Posted:

Mary,

You raise an extremely good point. Again, what you have stated just furthers my point that this has to be done on a case by case method. It should not be something done across the board without regard to individual situations.

The present board here, in my opinion, is very rational. We had another unit in our complex that was in the beginning stages of foreclosure and was somewhat behind in assessments. We monitored the situation and researched as best we could. It seemed eveident this owner was a victim of today's economy. We chose to sit back and to continue to monitor. In the end, the owner got themself out of foreclosure and has brought his assessments current. This board is not about eviction or running roughshod over owners at all costs.

In the situation that I've described regarding taking possession and renting, well, the owner moved out over 2 years ago. Back assessments totaled over 6K not including late fees or legal fees. It had been approximately 24 months that had transpired without one assessment payment. Our assessments during this period ranged from 150 to 185 a month, so to get to a 6K amount, you can see this owner was seriously behind. This owner also was in this situation prior to the economy taking the turn for the worse. In this situation the owner was not a victim of the economy. It seemed to be the "perfect" scenario (if anything in this type of scenario could be considered perfect) for the association to step up to the plate an do due diligence. After all, one of our responsibilities as a board is to collect assessments.

We have a 3rd unit where the owner has been in and out of court for 3 years,never paying assessments. This owner is also not a victim of the economy. He was cheating both the mortgage bank and our association well before the downturn in the economy. We tried eviction and the owner paid a large sum towards back assessments while agreeing to pay a certain amount each month until the account caught up. That was 2 years ago and we have not received a penny. We tried to garnish wages, but the owner is self employed which has complicated things. The owner now reports they are un-employed. We are still pursuing legal action, trying to figure out what to do next.

Sorry this is such a long post, but I felt it necessary to give some background to validate that we are not a renegade board in any definition of the term. I do realize that given the Illinois Condo Act, there could be instances where some boards could run roughshod over owners. It is a fine line between having not enough laws in place to protect Homeowner Associations and giving the same associations too much power. I'm lucky enough to be part of a board that knows and travels that fine line in a reasonable manner.

I provided this information simply to educate others the importance to look into your options, weigh the advantages and disadvantages, take note of common sense, and place yourselves in the shoes of others. I feel confident the action our board is taking is in the best interest of the association as a whole. In some circumstances, the board needs to take unfavorable steps in order to fulfill their duties.

In the end, it seems some states are over legalized and some are under legalized when it come to homeowner associations. I guess, the best we could do would be to find a way to creat some sort of grassroots movement to come to some rational laws across the board.

Rick

GlenL (Ohio)
Posts: 5,491

Posted:

Rick, here the BOD can cause an eviction 5311.19(B)(1) but we can't re-rent the unit however in the event of a foreclosure we have the right to get a receiver appointed and collect "rent" from the person being foreclosed on. 5311.18

(2) In a foreclosure action a unit owners association commences pursuant to division (B)(1) of this section or a foreclosure action the holder of a first mortgage or other lien on a unit commences, the owner of the unit, as the defendant in the action, shall be required to pay a reasonable rental for the unit during the pendency of the action . The unit owners association or the holder of the lien is entitled to the appointment of a receiver to collect the rental. Each rental payment a receiver collects during the pendency of the foreclosure action shall be applied first to the payment of the portion of the common expenses chargeable to the unit during the foreclosure action.

Studies show that 5 out of 4 people have problems with fractions

MaryA1 (Arizona)
Posts: 7,043

Posted:

Glen,

I took a look at the OH Condo statutes only because this topic really interests me and I'm curious to know what other states allow. Frankly, in reading your statute (5311.19), I'm of the opinion it only applies to a tenant and not the owner of the property, unlike the laws in Rick's state which DO apply to the property owner. Even the other statutes referenced -- 5321 and 1923 -- only apply to tenants. I didn't see any statute that specifically states a property owner can be evicted for nonpayment of Condo assn assessments.

MaryA1 (Arizona)
Posts: 7,043

Posted:

Rick,

Thx for the background info on the mindset of your board. I agree, it certainly does appear that they bend over backwards to be fair. It's a given that in some cases the BOD has no other recourse than to foreclose. I know my assn board doesn't take these cases lightly and each one is reviewed and assessed individually. There will always be errant boards out there who will go the foreclosure route immediately and on the flip side are the boards who let things go so long that their delinquencies eat up the budget. There has to be a happy medium and only the most consciensous board will find it.

The only thing that comes close to your feeling that there needs to be "rational laws across the board" is the UCIOA (uniform common interest ownership act). A number of states have adopted this act but it's been slow going. I, myself, do not agree with all the provisions of the act but do believe it would be a good thing if all the states were uniform in their HOA laws.

GlenL (Ohio)
Posts: 5,491

Posted:

Mary 5311.19 allows the BOD to initiate eviction proceedings and charge the fees to the property owner. 5311.18 deals with liens and foreclosures.

5311.18 Lien for common expenses.

(A)(1) Unless otherwise provided by the declaration or the bylaws, the unit owners association has a lien upon the estate or interest of the owner in any unit and the appurtenant undivided interest in the common elements for the payment of any of the following expenses that are chargeable against the unit and that remain unpaid for ten days after any portion has become due and payable :

(a) The portion of the common expenses chargeable against the unit;

(b) Interest, administrative late fees, enforcement assessments, and collection costs, attorney’s fees, and paralegal fees the association incurs if authorized by the declaration, the bylaws, or the rules of the unit owners association and if chargeable against the unit.

(2) Unless otherwise provided by the declaration, the bylaws, or the rules of the unit owners association, the association shall credit payments made by a unit owner for the expenses described in divisions (A)(1)(a) and (b) of this section in the following order of priority:

(a) First, to interest owed to the association;

(b) Second, to administrative late fees owed to the association;

(c) Third, to collection costs, attorney’s fees, and paralegal fees incurred by the association;

(d) Fourth, to the principal amounts the unit owner owes to the association for the common expenses or penalty assessments chargeable against the unit.

(3) The lien described in division (A)(1) of this section is effective on the date that a certificate of lien in the form described in division (A)(3) of this section is filed for record in the office of the recorder of the county or counties in which the condominium property is situated pursuant to an authorization given by the board of directors of the unit owners association. The certificate shall contain a description of the unit, the name of the record owner of the unit, and the amount of the unpaid portion of the common expenses and, subject to subsequent adjustments, any unpaid interest, administrative late fees, enforcement assessments, collection costs, attorney’s fees, and paralegal fees. The certificate shall be subscribed by the president or other designated representative of the association.

(4) The lien described in division (A)(1) of this section is valid for a period of five years from the date of filing, unless it is sooner released or satisfied in the same manner provided by law for the release and satisfaction of mortgages on real property or unless it is discharged by the final judgment or order of a court in an action brought to discharge the lien as provided in division (C) of this section.

(B)(1) The lien described in division (A)(1) of this section is prior to any lien or encumbrance subsequently arising or created except liens for real estate taxes and assessments of political subdivisions and liens of first mortgages that have been filed for record and may be foreclosed in the same manner as a mortgage on real property in an action brought on behalf of the unit owners association by the president or other chief officer of the association pursuant to authority given to that individual by the board of directors.

(2) In a foreclosure action a unit owners association commences pursuant to division (B)(1) of this section or a foreclosure action the holder of a first mortgage or other lien on a unit commences, the owner of the unit, as the defendant in the action, shall be required to pay a reasonable rental for the unit during the pendency of the action . The unit owners association or the holder of the lien is entitled to the appointment of a receiver to collect the rental. Each rental payment a receiver collects during the pendency of the foreclosure action shall be applied first to the payment of the portion of the common expenses chargeable to the unit during the foreclosure action.

(3) In a foreclosure action the holder of a lien on a unit commences, the holder of that lien shall name the unit owners association as a defendant in the action.

(4) Unless prohibited by the declaration or the bylaws, following a foreclosure action a unit owners association commences pursuant to division (B)(1) of this section or a foreclosure action the holder of a lien on a unit commences, the association or its agent duly authorized by action of the board of directors, is entitled to become a purchaser at the foreclosure sale.

(5) A mortgage on a unit may contain a provision that secures the mortgagee’s advances for the payment of the portion of the common expenses chargeable against the unit upon which the mortgagee holds the mortgage.

(6) In any foreclosure action, it is not a defense, set off, counterclaim, or crossclaim that the unit owners association has failed to provide the unit owner with any service, goods, work, or material, or failed in any other duty.

(C) A unit owner who believes that the portion of the common expenses chargeable to the unit, for which the unit owners association files a certificate of lien pursuant to division (A) of this section, has been improperly charged may commence an action for the discharge of the lien in the court of common pleas of the county in which all or a part of the condominium property is situated. In the action, if it is finally determined that the portion of the common expenses was improperly charged to the unit owner or the unit, the court shall enter an order that it determines to be just, which may provide for a discharge of record of all or a portion of the lien.

Effective Date: 07-20-2004

Studies show that 5 out of 4 people have problems with fractions

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