Repay Homeowners for Special Assessment?

I have a question and hope someone might be able to answer it. I live in California and am in an association of just over 100 units (also within a master association). Our association has charged the homeowners each year for special assessments covering the delinquent assessments of homeowners who have been through a foreclosure or bankruptcy. The association manager claims that they will go after the homeowners, (at least the ones they can go after), and sue them for these debts. He says once they receive payment via small claims judgements, they will repay the homeowners for the special assessments or put it into the reserves, whichever is voted on. I doubt that they can collect on the debt because it's already been collected on via the special assessment. Doesn't that amount to collecting on the same debt twice? Does anyone have any insight on the California law and situations like this? We're all sick of paying for everyone else's bad debts, but I hate for everyone to get their hopes up if it's not something that can eventually happen. Thanks.

We have about 10% of homeowners who are not paying due to financial circumstances. It's not a huge amount, less than $300 per year, but it's more the principle of the thing. Most of us are young families, just starting out, very young kids, growing families, and financially, everything hits us kind of hard. More than anything, I want to know if they can collect from these other homeowners in court after collecting from us. I seem to think that it's not possible, but hoping someone does know?

We have looked over the financials, the board is placing liens, but everyone is underwater and we never are able to collect through a foreclosure. I think everything is on the up and up, I was just curious about if boards ever do this and actually re-pay the homeowners who covered the bad debts?

Hi Janet,

I really appreciate your input. I've never been good at accounting and I want to be more involved in the board, so I do my best to understand! I get what you're saying about it being everyone's job to cover what the financial needs are, but the 10% who aren't paying, aren't paying the special assessment either. We don't have a surplus at the end of the year, or at least, I don't see any evidence of it in the year end financials. Sigh.

I just think it's weird that they keep saying they are going to sue the homeowners who have moved on (i.e. - homes sold at auction, short sales, etc...). I had always heard that the past due assessments would be paid at the time of the transfer of title, and I guess that's true for the one or two short sales that have been approved and gone through, but the auction sales have left us with piles of unpaid debt. Those debts are what they are collecting from us homeowners who still live here. (The new owners are current, thankfully!!) So I guess the owners that they can track down are going to get small claims notices, but I just don't get how they can sue someone in court if we've already paid their debt? I'm pretty sure our CC&R's (and the Davis Stirling Act) provides for different methods of collecting, but can they choose multiple methods like this? I guess that's where my question lies. Are they telling us the truth about being able to collect and either refund us or apply the surplus? Maybe it's a nit-picky question? Just curious! Thanks again for your time Janet!

Ricki

Ricki,

The special assessments were not to pay the deadbeat owners' debts. The special assessments were to pay the costs of operating the HOA. The deadbeat owners agreed to pay their assessments when they bought into the HOA. I am unaware of any body of law anywhere that cancels out their debt because the HOA had to resort to a special assessment to stay alive. If I write a bad check at my local grocery store, is my debt cancelled out when they raise their prices to cover the loss I cause them?

In most states, a mortgage lender's lien takes priortity over an HOA lien. When the lender forecloses, he is obligated to pay the HOA lien only if the lender can sell the property at auction for more than the borrower owed. That seldom happens, so the HOA rarely collects on its lien when there is a mortgage foreclosure. The failure to collect on that HOA lien does not erase the former deadbeat owner's debt. Suing in court to collect is common practice. My observation, however, is that suing is likely to place the HOA further behind. Suing costs money. If you cannot find the former owner, you cannot serve him with process. Even if you can get a judgment, you still have to collect. My POA was owed about $25,000, spent nearly $150,000 suing, and collected less than $20,000. I would say it was not worth it.