Foreclosures

Started by KaydenH • 2 replies • 1486 views

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KaydenH (Alaska)
Posts: 7

Posted:

Our condo association has had two bank foreclosures in the past couple years with the respective owners owing back dues and late fees; one also owed a special assessment. The legal documents indicate a buyer of a foreclosed unit is not responsible for any fees owed prior to purchase. Manager statements vs. financial records do not agree as to whether what ws owed was collected in one foreclosure. I would like to get some background information as to how bank foreclosures in a condo association typically work.

Questions:
(1) How do managers and boards keep up with notices of default?
(2) Are HOAs guaranteed anything by a bank when an owner goes into foreclosure?
(3) Do banks pay legal fees or special assessments owed at the time of foreclosure?
(4) Does a lien need to be filed so many months beforehand to be guaranteed its money from the bank?
(5) Do HOAs bother to go after a foreclosed owner for fees owed but not paid by a bank?
(6) Do matters pertaining to liens, lawsuits, and whether fees were collected on a foreclosure need to be documented in minutes?

The manager has made a couple statements at annual meetings:
(1) The HOA will recover attorney fees and the lien amount when the unit is sold by the bank.
(2) Six months of back dues are guaranteed by the bank in the event of a foreclosure.

We do not have a late payment policy. No two owners have been treated the same regarding delinquent dues. Nothing is documented in minutes—collection letters, filing liens, releasing liens, filing a lawsuit to foreclose on a lien, filing a collections lawsuit, or if what was owed was collected. The manager and president do most things; board members have admitted they do not know what is going on. No audit has been done for at least six years.

Also, what is a manager’s legal responsibility to guide the board in following the condo’s legal documents?

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Questions:
(1) How do managers and boards keep up with notices of default?
A. - We had an accounting office that managed our finances. They usually handled managing our money. The board approved expenditures. The president or other officer had authority to sign checks. Had to have 2 signatures of officers and 1 of the accountant for checks to be issued. Many use Management companies to manage their properties.

(2) Are HOAs guaranteed anything by a bank when an owner goes into foreclosure?
A. No. Bank foreclosures are SEPARATE than HOA's foreclosures. Unless there is a lien on the property the HOA will NOT receive any funds. Once the bank takes over the property they MAY pay the dues during their ownership period but don't expect it to be timely. BANKS always get paid FIRST regardless and the HOA is SECOND IF there is extra money.

(3) Do banks pay legal fees or special assessments owed at the time of foreclosure?
A. - Yes and no. The legal fees or special assessments should be rolled up in the Lien.

(4) Does a lien need to be filed so many months beforehand to be guaranteed its money from the bank?
A. - It may depend on each state/locality but I believe a Lien can be anytime before BANK foreclosure.

(5) Do HOAs bother to go after a foreclosed owner for fees owed but not paid by a bank?
A. No. The lien is that instrument of which the HOA has to go after these fees.

(6) Do matters pertaining to liens, lawsuits, and whether fees were collected on a foreclosure need to be documented in minutes?
A. It would be a good idea members know what is going on but not always necessary. It should be on the accounting ledger.

The manager has made a couple statements at annual meetings:
(1) The HOA will recover attorney fees and the lien amount when the unit is sold by the bank.
A. - Liens don't necessarily cost money to file or require and attorney. Although most will consult and use one. They may get the money but not in a timely manner. Most likely get the money when the bank SELLS or auctions off the property.

(2) Six months of back dues are guaranteed by the bank in the event of a foreclosure.
A. - No. Only the amount in the lien has a chance of getting paid back.

Also, what is a manager’s legal responsibility to guide the board in following the condo’s legal documents?
A. A HOA/Condo has to represented by legal council in court if filing a lawsuit. Otherwise, it's up to the individual members to review and understand their documentation.

Former HOA President

LawrenceC1 (Georgia)
Posts: 480

Posted:

Melissa's answers agree with my understanding of the process except for her answer on number 5:

Quote:

Posted By MelissaP1 on 02/22/2011 1:46 PM

(5) Do HOAs bother to go after a foreclosed owner for fees owed but not paid by a bank?
A. No. The lien is that instrument of which the HOA has to go after these fees.

Unless the owner has declared bankruptcy, any amount owed to the Association is a personal obligation of the owner. The lien makes sure you get what you can from the sale of the property, but any amount not collected at closing can be recovered from the prior owner even after they have sold the property and moved away.

The question you have to ask is whether collecting the remaining balance is worth the expense of lawyers, court proceedings, and possibly a skip tracer. Also, the prior owner must have money to pay the debt.

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