Is the next step foreclosure?

Started by BonnieG1 • 13 replies • 1504 views

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BonnieG1 (Nebraska)
Posts: 1,186

Posted:

Sometime last year we put a lien on a unit due to dues not being paid. We never did take the lien off, the reasoning for not taking the lien off was so that we did not have to continually be putting a lien on and taking it off. This owner is again almost three months behind in dues. The question was asked "What remedy to we have since there is already a lien on the unit?"
I am thinking the next step would be foreclosure.
We have asked our former on site bookkeeper to call the off site owner and she is very willing to call the owner. We will wait until after the 15th of this month before we calling.

My main question is when should we foreclose on the unit, if at all. I really really hope it doesn't come to foreclosure.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Bonnie,

As you know, Associations are not the first to be paid in a foreclosure process. Taxes, courts, First and possible second mortgages need to be satisfied prior to the Association when the property is foreclosed. If there isn't enough money, then the Association gets nothing.

If the initial lien was satisfied and not removed, technically you may not foreclose on it and the owner can certainly mount a decent argument that that lien was satisfied. If this challenge is made and won, the Association may be stuck with the legal expenses in challenging the foreclosure.

I know it's a technicality but legal cases are typically won and lost on technicalities.

BonnieG1 (Nebraska)
Posts: 1,186

Posted:

Thanks, Tim.
Looks like we will have to remove the first lien. And then if the owner doesn't pay place another lien on the unit.
This site has been a great help to me.

SheliaH (Indiana)
Posts: 6,964

Posted:

First thing - talk to your attorney to see what your options are. Given the expense of foreclosure and length of time it takes, foreclosing should only be done after everything else has failed.

In your case, I'd perfer a current bookkeeper or your attorney to contact this homeowner to see what the problem is (this way if things go sour, there won't be an issue over unauthorized people asking a homeowner about delinquent accounts). He or she may need a payment plan - get it in writing and don't drag it out forever. You might even consider waiving late fees if the homeowner complies with the rest of the plan.

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

TimB4 (Tennessee)
Posts: 21,059

Posted:

Bonnie,

One thing we have done which has proven successful is provide the member with the following options:

1) Pay the amount due plus late fees.

2) The Association will agree to waive all unpaid fees if the member pays all past due and all current year assessments in full within x amount of time.

We send these options to the member in our final letter that specifies that the Board will be deciding if additional collection actions are required (aka lien and/or foreclosure). We also invite them to the meeting if they desire to explain any mitigating circumstances the Board may not be aware of.

Every time we have done this, the member has chosen option 2.

It should be noted that once the Board sends the issue to the Association attorney, associated legal fees and court costs are added to the amount owed and those fees will not be waived.

BradP (Kansas)
Posts: 2,640

Posted:

Bonnie:

you really need to consult an attorney. I can only speak for Kansas but we can only forclose on a lien within 30 days. If we don't we have to release it and refile it. Also, if the initial lien was a year ago, satisfied and not removed you might have a legality issue.

In my opinion foreclosure should only be a last resort. Have you looked into collections? Sometimes the threat of ruining someone's credit is enough to get them to pay. Small claims court may be another option.

BonnieG1 (Nebraska)
Posts: 1,186

Posted:

Thanks for all your responses. Since I have been on the Board a little over a year now, this site has been a great learning tool.

We really do not want to foreclose, so sending it to a collection agency is a better option.

At this time we do not have an Attorney, but our Vice-President has been interviewing attornys.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Bonnie

There are some law firms that have a section devoted to HOA's dues collections. They can usually be retained for little money and they then go in steps during which the dues ower can stop the process by paying (there will be extra cost above the owed dues to cover the firms cost) or the HOA can stop the process at any time before foreclosure.

Hope this helps.

KellyM3 (North Carolina)
Posts: 2,239

Posted:

Bonnie,

You'd be required to remove a lien once the property owner pays the delinquent HOA debt. In all likelihood, your expenses for chasing the dues payers are recouped when the property owners pays the delinquent account off. The expenses are a pass through.

That's why removing and reinstating liens shouldn't be that big of a deal. The dues payer controls the process. The board of directors simply follows the process in reaction the economic non-activity - the person doesn't pay dues.

ChrisP5 (Missouri)
Posts: 165

Posted:

Tim - What is your time frame for having them pay all past dues plus dues for the rest of the year?

It doesn't work in Bonnie's case but one thing that our association now requires when agreeing to a payment plan on outstanding debt is setting up ACH payments. So far (fingers crossed) once those individuals have gone on ACH we haven't had problems with them falling behind again.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Chris,

We give them 30 - 60 days [depends on the date of our next board meeting].

Our governing documents specifies that Assessments are annual. The Board already allows a payment plan by allowing members to pay monthly. Per the CC&Rs, if a scheduled payment is not received by the end of the month a 10% charge is applied.

By the time these options are offered, the member is already 90+ days behind in payments. The Board has sent a minimum of 3 letters (30 day, 60 day, 90 day)and is ready to send the issue to the attorney. This final letter informs the member that the board is making a decision at the next board meeting to a) accelerate payments (allowed by governing documents) and b) to send the issue to the attorney to escalate the collection process. [note accelerating payments allows us to file a lien for the whole year and not have to update the lien as often]. The member is offered the following to stop this process:

1) Pay all charges and past due amounts to bring the account current

2) Pay all past due amounts and all remaining payments for the year in full. If this option is selected, the Board will waive all unpaid charges.

3) Invited to attend the meeting to explain any mitigating circumstances and discuss payment options that may be better suited to the extenuating circumstances than option 1 or 2.

So far, everyone offered these options have chosen option 2. Many have asked for an extension [typically a month or two] to pay and it's always been granted. However, we make it known that if the full payment isn't made by the end of the extension, the board will forward the issue to the attorney.

Note: this final option is not a written option. It's what the last two boards have decided to offer. A future board might no longer offer this option. Additionally, if this option was part of a resolution, there is concern of creating a loophole that allows members to avoid paying assessments on time.

BonnieG1 (Nebraska)
Posts: 1,186

Posted:

Quote:

Posted By TimB4 on 04/11/2012 7:14 PM
Chris,

We give them 30 - 60 days [depends on the date of our next board meeting].

Our governing documents specifies that Assessments are annual. The Board already allows a payment plan by allowing members to pay monthly. Per the CC&Rs, if a scheduled payment is not received by the end of the month a 10% charge is applied.

By the time these options are offered, the member is already 90+ days behind in payments. The Board has sent a minimum of 3 letters (30 day, 60 day, 90 day)and is ready to send the issue to the attorney. This final letter informs the member that the board is making a decision at the next board meeting to a) accelerate payments (allowed by governing documents) and b) to send the issue to the attorney to escalate the collection process. [note accelerating payments allows us to file a lien for the whole year and not have to update the lien as often]. The member is offered the following to stop this process:

1) Pay all charges and past due amounts to bring the account current

2) Pay all past due amounts and all remaining payments for the year in full. If this option is selected, the Board will waive all unpaid charges.

3) Invited to attend the meeting to explain any mitigating circumstances and discuss payment options that may be better suited to the extenuating circumstances than option 1 or 2.

So far, everyone offered these options have chosen option 2. Many have asked for an extension [typically a month or two] to pay and it's always been granted. However, we make it known that if the full payment isn't made by the end of the extension, the board will forward the issue to the attorney.

Note: this final option is not a written option. It's what the last two boards have decided to offer. A future board might no longer offer this option. Additionally, if this option was part of a resolution, there is concern of creating a loophole that allows members to avoid paying assessments on time.

We have something similiar in place (without the lawyer at this time). Our former bookkeeper did call the owner. He had been in the hospital and promised to send the amount requested to pay him through the end of August. What we need to do when we get this check is remove the lien that should have been removed when he was behind and caught up earlier. FYI He is an off site owner who inherited the unit.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Phone calls and personal visits are great. However, always follow up with a letter to the individual specifying what you understood from that visit or phone call. This way there is a paper trail and minimized misunderstandings.

KellyM3 (North Carolina)
Posts: 2,239

Posted:

Phone calls and personal visits, legally, mean very little. However, I'm glad to hear that "non-official" outreach efforts do yield results w/out running through the state collection laws and process.

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