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Subject: Differing Legal Opinions
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JohnC46
(South Carolina)

Posts:10366


01/03/2021 11:58 AM  
Not asking for advice, just telling a story. We asked two different lawyers opinions on this.

As we understand it, in SC an HOA can only foreclose on unpaid Dues. Not on unpaid HOA Fines.

EXAMPLE: Dues due $100. Fines due $200. Total Due $300. $100 is paid. The $100 is taken off the $300. Balance due is now $200.

One lawyer says Dues were not paid and the HOA can foreclose.

One lawyer says no way as it is a roundabout way of foreclosing on fines. This lawyer has one of the largest HOA practices in SC.

Posters often forget laws vary state to state but here we have two differing opinions in the same state.





JohnC77
(Washington)

Posts:434


01/03/2021 12:39 PM  
Not sure what you're asking. For instance, in California, you can't record a lien on fines, nor can you foreclose on fines. You can foreclosure after 12 months or $1800 whichever comes first. In California, monies paid have a set sequence. If there is a balance owning on assessments, monies will first always be applied to assessment.

What you haven't posted in what the laws are in your state, because mine doesn't matter.
ChrisE8
(New York)

Posts:366


01/03/2021 12:49 PM  
Posted By JohnC46 on 01/03/2021 11:58 AM
Not asking for advice, just telling a story. We asked two different lawyers opinions on this.

As we understand it, in SC an HOA can only foreclose on unpaid Dues. Not on unpaid HOA Fines.

EXAMPLE: Dues due $100. Fines due $200. Total Due $300. $100 is paid. The $100 is taken off the $300. Balance due is now $200.

One lawyer says Dues were not paid and the HOA can foreclose.

One lawyer says no way as it is a roundabout way of foreclosing on fines. This lawyer has one of the largest HOA practices in SC.

Posters often forget laws vary state to state but here we have two differing opinions in the same state.









Well, sure, you often get differing opinions about the same thing from multiple doctors, lawyers, etc.--see, e.g., the Supreme Court (it's not always unanimous).

I'd go with lawyer #2--the cautious one.
AugustinD


Posts:4828


01/03/2021 12:53 PM  
-- To me, this is perhaps a situation that, if taken to court through a foreclosure action, would be a case of first impression in South Carolina. Hence, "The law would be what the court says tomorrow."

-- I think this means that, for one thing, now the question before the Board is whether the cost of attempting to foreclose would be worth the uncertain benefit.

-- The HOA attorney advising an SC HOA Board that it can foreclose has a conflict of interest: The attorney can accumulate lots of billable hours. (Thank god HOA attorneys are not posting here with their nonsense that everything they do is in the interests of their client. Horse hockey.)

-- By contrast, the HOA attorney advising the SC Board that it cannot successfully foreclose does not have the same conflict.

-- That foreclosure is a bad choice in this instance seems clear enough to me.
ChrisE8
(New York)

Posts:366


01/03/2021 1:04 PM  
I wouldn't see it as a conflict of interest for a lawyer to tell a client that the client can do something that the client may want to do, if that would result in more work for the lawyer. No business deal where the parties had lawyers would ever get done if that were the case.
AugustinD


Posts:4828


01/03/2021 1:12 PM  
Posted By ChrisE8 on 01/03/2021 1:04 PM
I wouldn't see it as a conflict of interest for a lawyer to tell a client that the client can do something that the client may want to do, if that would result in more work for the lawyer. No business deal where the parties had lawyers would ever get done if that were the case.
My point is that a client or potential client must always factor in that an attorney inevitably serves two entities: Himself (so as to make as much money as possible) and the client. To an unscrupulous attorney, a legal issue that is not perfectly clear promises a cash cow. Competition among attorneys these days is keen. Why? Because law schools have taken advantage of the student loan industry to the max; law students have borrowed to the max; and so plenty of attorneys are about, like sharks circling an unfortunate swimming dog.

What to do? Don't trust your attorney more than 50%.
ChrisE8
(New York)

Posts:366


01/03/2021 1:17 PM  
Posted By AugustinD on 01/03/2021 1:12 PM
Posted By ChrisE8 on 01/03/2021 1:04 PM
I wouldn't see it as a conflict of interest for a lawyer to tell a client that the client can do something that the client may want to do, if that would result in more work for the lawyer. No business deal where the parties had lawyers would ever get done if that were the case.
My point is that a client or potential client must always factor in that an attorney inevitably serves two entities: Himself (so as to make as much money as possible) and the client. To an unscrupulous attorney, a legal issue that is not perfectly clear promises a cash cow. Competition among attorneys these days is keen. Why? Because law schools have taken advantage of the student loan industry to the max; law students have borrowed to the max; and so plenty of attorneys are about, like sharks circling an unfortunate swimming dog.

What to do? Don't trust your attorney more than 50%.




Any reputable lawyer will tell the client what the lowest-cost approach of obtaining the client's goals is, and will try to dissuade the client from running up a legal bill that's not necessary. Why? Because if clients dispute or don't pay bills, there's not much that a lawyer can do, and because there are ethics rules that prohibit lawyers from asserting frivolous claims and making indefensible legal arguments.

If you have a lawyer who you suspect might want to run up a bill more than the bare minimum that's necessary to achieve what you want (and what the lawyer thinks is realistic, if less), then find another lawyer.
AugustinD


Posts:4828


01/03/2021 1:31 PM  
Nonsense.
ChrisE8
(New York)

Posts:366


01/03/2021 1:34 PM  
AugustinD, I'm not going to argue with you, so this is the end of my participation in this discussion. I speak from experience, though.
AugustinD


Posts:4828


01/03/2021 1:43 PM  
I think your presumption that I do not speak from experience says it all.
JohnT38
(South Carolina)

Posts:452


01/03/2021 1:55 PM  
This article indicates that you can currently do this for fines. There is a proposed bill to eliminate the ability to foreclose for past due fees or fines.

https://www.wmbfnews.com/2019/11/26/new-sc-bill-could-limit-hoa-power-by-eliminating-foreclosures/#:~:text=HOAs%20currently%20have%20the%20power,the%20associations%20from%20this%20power.
MelissaP1
(Alabama)

Posts:9862


01/03/2021 2:17 PM  
This is the "tricky" accounting practice I reference to many times. I do not agree with it at all. However, there are some HOA's this is their way. That way they can enforce fines. Fines work like "speeding tickets" and are NOT to be "income" to the HOA. It is a corrective measure. That is why Fines are not for lien/foreclosure. That is for loss of income.(Dues).

Now that isn't to say that if the HOA fixes a violation. (Example: Wrong paint color). If someone paints their house the wrong color the HOA can tell the owner to correct it or they HOA will do it for them. It will be at the HOA's expense. That expense is then passed onto the owner to pay. If they do not pay, then the HOA can lien for that. It is because it is considered "Damages". Not unlike what you win in a lawsuit. However, from what I understand you can't translate this lien to a foreclosure as it's NOT dues.

The cat is kind out of the bag as far as enforcement if owners/members find out fines are basically unenforceable. You could sue but one can simply sell/move and never pay. Having it so that your dues apply to your outstanding fine amount turns it into the appearance of unpaid dues. Which that does allow one to take action upon by lien.

Former HOA President
JohnC46
(South Carolina)

Posts:10366


01/03/2021 2:34 PM  
Posted By JohnT38 on 01/03/2021 1:55 PM
This article indicates that you can currently do this for fines. There is a proposed bill to eliminate the ability to foreclose for past due fees or fines.

https://www.wmbfnews.com/2019/11/26/new-sc-bill-could-limit-hoa-power-by-eliminating-foreclosures/#:~:text=HOAs%20currently%20have%20the%20power,the%20associations%20from%20this%20power.



Personally I would work against this bill. I do agree in not being able to foreclose due to fines. I do not agree with not being able to foreclose for unpaid dues.

Fines can be capricious. Unpaid dues are a fact.
JohnC46
(South Carolina)

Posts:10366


01/03/2021 2:37 PM  
Posted By JohnC46 on 01/03/2021 2:34 PM
Posted By JohnT38 on 01/03/2021 1:55 PM
This article indicates that you can currently do this for fines. There is a proposed bill to eliminate the ability to foreclose for past due fees or fines.

https://www.wmbfnews.com/2019/11/26/new-sc-bill-could-limit-hoa-power-by-eliminating-foreclosures/#:~:text=HOAs%20currently%20have%20the%20power,the%20associations%20from%20this%20power.



Personally I would work against this bill. I do agree in not being able to foreclose due to fines. I do not agree with not being able to foreclose for unpaid dues.

Fines can be capricious. Unpaid dues are a fact.



ADD ON as there is no edit a post.

I do agree on liens based on fines, but not foreclosure.
JohnC46
(South Carolina)

Posts:10366


01/03/2021 2:45 PM  
Posted By AugustinD on 01/03/2021 12:53 PM
-- To me, this is perhaps a situation that, if taken to court through a foreclosure action, would be a case of first impression in South Carolina. Hence, "The law would be what the court says tomorrow."

-- I think this means that, for one thing, now the question before the Board is whether the cost of attempting to foreclose would be worth the uncertain benefit.

-- The HOA attorney advising an SC HOA Board that it can foreclose has a conflict of interest: The attorney can accumulate lots of billable hours. (Thank god HOA attorneys are not posting here with their nonsense that everything they do is in the interests of their client. Horse hockey.)

-- By contrast, the HOA attorney advising the SC Board that it cannot successfully foreclose does not have the same conflict.

-- That foreclosure is a bad choice in this instance seems clear enough to me.



I agree. I could not in clear consciousness recommend our BOD pursue a foreclosure where fines are part of the package.

I would recommend we do a foreclosure, if the economics are in our favor, based on unpaid dues. We presently have our attorney "investigating" the financial situation of 2 of our 112 homes, that are over 2 years behind in dues for foreclosure. Only if in our favor by a large amount, will I vote to pursue foreclosure and even then, I am not comfortable with it. I need convincing. I do not want us to be in the real estate business.
AugustinD


Posts:4828


01/03/2021 3:00 PM  
Posted By JohnC46 on 01/03/2021 2:45 PM
We presently have our attorney "investigating" the financial situation of 2 of our 112 homes, that are over 2 years behind in dues for foreclosure. Only if in our favor by a large amount, will I vote to pursue foreclosure and even then, I am not comfortable with it. I need convincing. I do not want us to be in the real estate business.
I would like to read about the experience of HOAs that have foreclosed on homes in the last ten years or so. I am observing a foreclosure effort by a HOA as we speak. The court-filed complaint seems to be mostly boilerplate. Specifically the court-filed complaint asks the court to appoint xyz to sell the home at auction. Then the HOA wants the proceeds from the home sale, less expenses, to go to the HOA. It's a suit where the core dispute is over a few thousand dollars. To say the least, I imagine for a few reasons it would terrify a defendant that either (a) did not have either an adequate defense; or (b) has a good defense, but said defense requires a good attorney to put forward, costing a great deal of money, of course. One incompetent board making up fines, in a state where foreclosure on fines is allowed, then foreclosing on the fines, and the world turns topsy-turvey for some poor soul. As it has in the case I am 'observing.' I could just kill the two-bit HOA attorneys who brought the foreclosure action for the HOA.
JohnT38
(South Carolina)

Posts:452


01/03/2021 3:11 PM  
Posted By JohnC46 on 01/03/2021 2:34 PM
Posted By JohnT38 on 01/03/2021 1:55 PM
This article indicates that you can currently do this for fines. There is a proposed bill to eliminate the ability to foreclose for past due fees or fines.

https://www.wmbfnews.com/2019/11/26/new-sc-bill-could-limit-hoa-power-by-eliminating-foreclosures/#:~:text=HOAs%20currently%20have%20the%20power,the%20associations%20from%20this%20power.



Personally I would work against this bill. I do agree in not being able to foreclose due to fines. I do not agree with not being able to foreclose for unpaid dues.

Fines can be capricious. Unpaid dues are a fact.




Agree 100%.
JohnC46
(South Carolina)

Posts:10366


01/03/2021 3:26 PM  
Aug

A good attorney can easily find the mortgage/liens and the amounts owed on a property. It then becomes more an economic decision versus a moral or righteous decision.

I believe a foreclosure will cost the BOD about $3K to $6K and take a year. That said:

Property sale value of say $200K. Total of $50K owed in mortgage(s)/lien(s). A no brainer. Anything else, needs to be considered. In our two cases, it might be worth us doing it on one home, but not the other. Covid slowed everything down so we do not yet have all the information we need.

ChrisE8
(New York)

Posts:366


01/03/2021 3:30 PM  
I don't understand using a lawyer for lots of these things. A title company can also find property records and amounts owed, for cheaper.
AugustinD


Posts:4828


01/03/2021 3:32 PM  
Posted By JohnC46 on 01/03/2021 3:26 PM
I believe a foreclosure will cost the BOD about $3K to $6K and take a year.
I hear you on the math. Generally I remain a fan of HOAs recording a lien on the property, likely costing less than $100.

If things are getting out of control with HOA Owners not paying the regular assessment, more drastic action, by way of making an example of some who owe the most, may be justified, at least from where I am sitting.

From what I am witnessing (a foreclosure on a fine), I agree with you and JohnT38: Foreclosures ought only be allowed and considered on those homes where the owners are behind on the regular assessment.
JohnC77
(Washington)

Posts:434


01/03/2021 6:45 PM  
I don't believe an HOA should be allowed to foreclosure on a home within a community. There are not smart enough to understand the consequences and ramifications of such action on their part.

I have never heard anyone on this forum sell me on them knowing how to actually handle a foreclose.
GeorgeS21
(Florida)

Posts:3602


01/03/2021 7:00 PM  
Yep, JohnC77, you’re right ... they are not as smart as you ....hahahaha.

Sure, could have simply been your smarter than everyone else thing that elicited this response.

Better now?
JohnC77
(Washington)

Posts:434


01/03/2021 7:39 PM  
Posted By GeorgeS21 on 01/03/2021 7:00 PM
Yep, JohnC77, you’re right ... they are not as smart as you ....hahahaha.

Sure, could have simply been your smarter than everyone else thing that elicited this response.

Better now?



OK professor, you just been called out, enough BS. Educate us. Tell us what the HOA does with the property they just foreclosed on!
AugustinD


Posts:4828


01/03/2021 8:10 PM  
Posted By JohnC77 on 01/03/2021 7:39 PM
Educate us. Tell us what the HOA does with the property they just foreclosed on!
When you need education, speak for yourself. The property is sold at auction.
JohnC77
(Washington)

Posts:434


01/03/2021 8:15 PM  
Posted By AugustinD on 01/03/2021 8:10 PM
Posted By JohnC77 on 01/03/2021 7:39 PM
Educate us. Tell us what the HOA does with the property they just foreclosed on!
When you need education, speak for yourself. The property is sold at auction.



Let the person speak for themselves. He called me out, let him answer!

For the record, that wasn;t the question I asked.
AugustinD


Posts:4828


01/03/2021 8:29 PM  
Posted By JohnC77 on 01/03/2021 8:15 PM
Educate us.
Speaking for others, when they have not asked you to do so, is bad manners.
JohnC77
(Washington)

Posts:434


01/03/2021 8:34 PM  
Posted By AugustinD on 01/03/2021 8:29 PM
Posted By JohnC77 on 01/03/2021 8:15 PM
Educate us.
Speaking for others, when they have not asked you to do so, is bad manners.



Go back to being someone's research assistant!
LetA
(Nevada)

Posts:1069


01/04/2021 5:58 AM  
In many states you cannot foreclose on unpaid fines, UNLESS the fine that is unpaid was for a violation that threatens the safety and welfare of the community.

And John, I agree about HOA's should not be able to foreclose on unpaid assessments or fines. The foreclosure law was changed here in Nevada about four years ago. Now, HOA's if a house has a mortgage, the HOA must contact the bank before they foreclose. The Bank then is required to pay the HOA 9 months of assessments. Prior to this, HOA's were foreclosing on homes, and selling them for the unpaid assessments and associated fees NOT the market value of the home. This had many board members or their friends buying up properties.
TimB4
(Virginia)

Posts:17180


01/04/2021 6:08 AM  
It would boil down to how payments are posted.

If payments first pay down the late charges then the assessments, the assessments were not paid off and one could foreclose.

If the payments first pay down the assessments then the late charges, the assessments were paid and you may not foreclose.


If there is no written policy on how payments are applied, it would be 50/50 in court - hence the two opinions.



Additionally, I would again like to remind everyone of the posting rules - especially rule one:

(1) Post any relevant topic you like, but please keep it clean, helpful, positive and friendly.
GeorgeS21
(Florida)

Posts:3602


01/04/2021 8:08 AM  
My only point in making fun of JohnC77 is because he usually mentions, or infers, how much smarter he is than those dumb people on HOA boards - he may be smart(er), but ...
JohnC77
(Washington)

Posts:434


01/04/2021 8:10 AM  
Posted By GeorgeS21 on 01/04/2021 8:08 AM
My only point in making fun of JohnC77 is because he usually mentions, or infers, how much smarter he is than those dumb people on HOA boards - he may be smart(er), but ...



I have NEVER said I was smarter, it was what YOU implied.
GeorgeS21
(Florida)

Posts:3602


01/04/2021 8:24 AM  
Nah - nice try, though, JohnC77.

This sort of stuff usually catches up with one, ya know.
JohnC77
(Washington)

Posts:434


01/04/2021 8:45 AM  
Posted By GeorgeS21 on 01/04/2021 8:24 AM
Nah - nice try, though, JohnC77.

This sort of stuff usually catches up with one, ya know.



You're absolutely right, it does catch up with YOU!
SheliaH
(Indiana)

Posts:3670


01/04/2021 8:46 AM  
Not only that, but a judge who heads the case may have a completely different take on the issue than another who heads an appeal - and the opinion can change h t at an if the case progresses to a higher court. Or if the attorney changes mid lawsuit (he or she may use a different strategy or is better at trial and I'd evidence gathering, etc.)

This is why I try not to answer the "is this legal" questions on this website. Most of us aren't attorneys and even if we get part of what may be in the documents, the real answer or part of it may be elsewhere and we don't have that information. it's still a bad idea to get legal advice on specific legal situations from the internet use it to get basic knowledge so you'll have a better idea on what you may need to ask, but understand you may have no choice but to run your situation by an attorney so you'll have a better understanding of what your options are.

I've also found that when people gripe about their board, property manager or whatever, they tell us what they want us to hear because they've already decided what they want to do and need an amen corner. It's ok to ask questions to give you something to think about Or if you really don't know, but I get irked at the "here some more information" add ons. That stuff can turn the answer very quickly, so you may as well speak up the first time. that doesn't mean I'm right and you're working or vice versa - maybe the answer is somewhere in the middle. Very few things are all black or white.
JohnC46
(South Carolina)

Posts:10366


01/04/2021 8:49 AM  
Posted By TimB4 on 01/04/2021 6:08 AM
It would boil down to how payments are posted.

If payments first pay down the late charges then the assessments, the assessments were not paid off and one could foreclose.

If the payments first pay down the assessments then the late charges, the assessments were paid and you may not foreclose.


If there is no written policy on how payments are applied, it would be 50/50 in court - hence the two opinions.



Additionally, I would again like to remind everyone of the posting rules - especially rule one:

(1) Post any relevant topic you like, but please keep it clean, helpful, positive and friendly.



To clarify. The 2nd attorney (the more HOA experienced one) said going to court over this practice would be risky and would totally depend on the judge's view versus based on law. He did not say one could not.
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