Foreclosures and previous dues

The lender is the bank correct? I believe it is the owner who owes the dues not the bank. However, once the bank has finished foreclosing and owns the property they are responsible from that point on until a new owner buys it. That new owner will now be a HOA member and responsible for ONLY the dues from their date of purchase.

The banks will drag their feet to pay. Expect them to catch uo on the dues when they sell the property IF then...I hope your HOA had a lien on that owner or otherwise you may not be able to collect the back dues owed...

You may want to check your state statutes regardings this, if there are any. Florida has very specific requirements on who is responsible for what in bank foreclosures.

One year or 1% of the mortgage, whichever is less.

Foreclosures by banks, in most states, will end all HOA efforts to collect delinquent dues. The foreclosure act "cleanses" the liens and clears the title.

The bank, which owns a clear deed, then begins owing HOA dues and the HOA board would have to, then, chase the bank through collections as it did the previous owner - another long-term process. What a pain.
Dues travel with the deed and not owners unless foreclosure occurs against the deed-holder.

Details are needed but some states allow HOA liens to hold a superior status to first mortgages. I don't think Georgia bestows HOA liens such a "super" status.

If the bank has officially foreclosed, auctioned the house to no new buyer, then you have a new dues account.

Kelly,

I believe you are correct in saying that the liens expire after a foreclosure, and the association no longer has a claim against the property for unpaid dues.

However, unless there is an accompanying bankruptcy by the former owner, the unpaid dues are still a personal obligation of the former owner. The HOA can still attempt to collect those unpaid dues, even though the HOA no longer holds a lien on the property.

And you are also correct that in Georgia we do not have a law that grants an HOA "super" lien status.

Usually banks leave the property in the former owners name so they don't have to be responsible for the dues. When they are ready to close on a sale they transfer the property over to their own name. From that point on they are responsible for any dues. It is an outrage that they are able to legally do that.

"If a bank didn't transfer property to its name it means it hasn't foreclosed on it."

Jeff,
Are you speaking from experience or is that perhaps a State thing in California ? We have had two units here where the lender removed the owners, locked up the property and waited to transfer title until just before selling.Usually after a sale has been arranged.
They put it in the hands of another company to come secure and clean up the place ready for a sale. Just before selling is when they transfer title cheating us out of what are usually months of dues.
If they haven't foreclosed how can they legally do that ? are we missing something here ?

I've been where you are...Give up the hope and put in a bit of prevention...This is a learning experience at this point. If the people didn't have the money to pay their mortgage or fight the foreclosure, then why would the HOA get any money? The lien is most likely useless at this point as the BANK ALWAYS GETS PAID FIRST and FOREMOST. All other debtors get whatever is left over. Liens work as a good threat when owners are in a situation to sell their property. They don't work as well when the owner is in a position of losing everything. However, it is still best to have a lien no matter what as that is your only hope... After the fact not so much...

We had a policy of after 6 months of non payment of dues we placed a lien on the property. This way we had an established policy and those who violated it knew they would be liened 6 months no matter how much they protested. This also helped define what is late or non paying situation.

I also discovered the local newspaper offers a few times a week a "LEGAL" section in the classified section of the newspaper. It is best to read this section. This is where the foreclosure and liens are posted. This way your HOA can find out what homes in the HOA are facing foreclosure/lien/legal action and take the appropriate actions. I once found an owner who's home was to be taken away in a few days and able to put a lien on it prior. Didn't get the money from it, but did atleast learn how to put in measures in the future for this NOT to happen again.

It's time to chalk this up to learnining experience to prevented measures...

Just an FYI - our HOA has had success in collecting dues from two major banks. One which was not in foreclosure and one where the owner filed bankruptcy and "surrendered" the property to the lender. In both cases, persistence paid off.

John,
interesting ... this is a situation that many of us on boards face. Cost of pursuing it is always the topic that comes up. Anything you can share on what you found out would be appreciated.

Fred

Understand I am not an attorney and what I researched was primarily SC law.

In SC we have a Magistrates Court for civil judgements less then $7,500.00. Some say it is the same as Small Claims Courts in other states. It cost $80.00 to file a claim. If the defendant does not show up for the hearing in front of the Magistrate or loses the case, they are ordered to pay. If they do not pay then the Magistrates Court will notify the Clerk of Courts and a Judgement Lien is filed against the defendant.

I have skipped over things as I am not trying to play attorney but just put you on a track to explore.

Brad

I agree one has to look at all aspects and even draw a line in the sand.

We have two situations here.

First is a forclosure and the homeowner says he is up to his eyeballs in debt and as much as he would like to pay his dues, he just does not have the money. Food for his family comes first.

Second home is in estate (owner died) and on the market. They simply ignore our letters.

That said, it might not be possible to get blood from a stone (1st case) but one will never know for sure until one squeezes the stone (2nd case)...LOL

I would think that an heir would be responsible for the dues. Certainly you should investigate putting a lien on the property.

Kelly,

Could you post the clause in your bylaws that forbids collecting after a foreclosure? It's something I haven't encountered. It's unusual to see a developer give anyone a break that they aren't forced to give.

Here's how it reads:

"The lien of the assessments provided for herein on any lot shall be subordinate to the lien of any first mortgage and ad valorem taxes on such lot. Sale or transfer of any lot shall not affect the assessment lien; however, the sale or transfer of any lot pursuant to mortgage foreclosure or any proceeding in lieu thereof, shall extinguish the lien of such assessments as to payments which became due prior to such sale or transfer. No sale or transfer shall relieve such lot form liability for assessments thereafter becoming due or from the lien thereof."

I read to that paragraph to say a mortgage foreclosure ruins my HOA's chances at collecting on any liens for past-due monthly fees.

Kelly,
I am not a lawyer and don’t even play one on TV, but the language in your document is similar to what is in ours. This is how it has been explained to me…

This is fairly clear. The HOA lien comes after the first mortgage and tax liens.

Also clear. Although I don’t understand how a sale can occur without first satisfying the lien.

Here’s the confusing clause. What it appears to say is that after a foreclosure the lien is extinguished. This is to be expected, and it exempts the bank that forecloses on the property from having to make good on outstanding liens. Banks want to see this clause in governing documents before they grant a mortgage.

This last clause simply says that any new assessments that come after the a sale or foreclosure are okay.

There doesn’t seem to be anything here that would prevent your HOA from pursuing debts as a personal obligation of the former homeowner – even after a foreclosure.

And since you can do this, you may be obligated to do it because of your fiduciary responsibility to the members. Please check with your attorney.

Kelly

While I agree one has to decide how to wisely spend HOA funds, in SC it costs $80.00 to file a Magistrates Court claim.

For that cost, I lean toward filing whatever, whenever on the chance money might be collected.

Kelly

Exactly my point, not every collection situation is the same. You could be dealing with someone in bankruptcy, on the verge of bankruptcy, in foreclosure or on the verge of foreclosure. You may be dealing with a company out of state or a person's estate or a rich doctor who decides he doesn't want to pay. You can't apply the same collection practice for all of these people as each scenario is different. Would the board sink money into court costs to go after the doctor, more than likely yes because they know the risk is worth it. would they sink money into someone on the verge of bankruptcy? i wouldn't as that is money wasted. As I mentioned in our state filing a lien is $8 plus 26 cents for every hundred dollars owed. That is a no brainer as step one. Beyond that requires you to examine the situation and see what is both practical and good business.

Kevin,

This is very old conversation thread. Please post this inquiry as a brand new posting and you should get better response.