Collecting HOA dues from a tenant while owner is in bankruptcy

Started by MsM • 21 replies • 2275 views

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MsM (Florida)
Posts: 5

Posted:

I am a board member for a small (32 unit) condominum in central Florida. There is one unit where the owner owes in excess of $12,000 in unpaid dues, including late fees. He stopped paying the HOA as well as his mortgage in 2007 or so, and the association placed a lien for the unpaid dues in 2008 I believe. He went through forclosure, was issued a foreclosure judgement against him, and the property was scheduled for auction about a month after the final judgement was issued. Within days or weeks before the auction, he filed for bankruptcy (over 7 months ago now), which I know places a stay on the foreclosure until he is dischagred from bankruptcy.

The issue is that the owner has a tenant, whom is believed to be a friend of his, living in the unit for 3+ years now. The children of said tenant are quite disruptive to others in the community. I would also be willing to bet that there is no valid lease agreement, and that the owner is letting this person live there for free while he rides out his bankruptcy for who knows how long. In looking at public records, this is his 3rd or 4th forclosure in the last 3 years.

I understand that in Florida the HOA can collect unpaid dues from the tenant of a delinquent owner. My question is: does the owner's bankruptcy prevent us from attempting to collect the dues from the tenant? If there is no valid lease, and the tenant is not paying rent in the first place, can we (the HOA) still collect, and if the tentant does not pay, can we then move to evict?

Our HOA management company and the association's attorney haven't really made this a priority (for whatever reason), and the board is looking for solutions to get this unwanted tenant out of the community.

Any insight would be greatly appreciated. Thank You.
Mike

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

Quote:

I would also be willing to bet that there is no valid lease agreement, and that the owner is letting this person live there for free while he rides out his bankruptcy for who knows how long. In looking at public records, this is his 3rd or 4th forclosure in the last 3 years.

Puuuuure speculation he isnt paying. I dont even know why people bother with side comments like these.

You can try billing the tenant monthly dues. Doesnt mean you will get them.

PaulT6 (California)
Posts: 409

Posted:

My guess is that if he is in the process of bankruptcy you can't touch him. After it is finalizes I think you will have to get in line with all the other creditors. I think trying to bill the Tennant for anything has two chances, none & none. Just my novice opinion :-)

Paul T

MelissaP1 (Alabama)
Posts: 13,836

Posted:

I believe Florida is the only state that it is possible for a tenant to pay the dues of the owners on their behalf. That is in cases where they may lose their home otherwise. I've seen that posted by other Floridians in here. However, it's best you do research on the property first by following the tax records. Find out who actually owns the property.

You may be able to put some of the debt load onto the tenant, but don't expect payment. They may choose to move out instead. That is why you need to stay a step ahead and find out the owner situation. It could be that your HOA can indeed hold some power in this process. It's time to consult a lawyer for the best advice here.

Former HOA President

GlenL (Ohio)
Posts: 5,491

Posted:

While it is a question for an attorney, which I am not, as I understand it once the bankruptcy is filed, assuming he listed the HOA everything is frozen at that point. However anything going forward of that point is new debt and is fair game, so go after it and next time don't let them get so far in the hole before the HOA acts. Better to foreclose, eat the fees and get someone in that will pay than to sit and hope.

Studies show that 5 out of 4 people have problems with fractions

MsM (Florida)
Posts: 5

Posted:

Quote:

Posted By SteveM9 on 09/06/2012 7:48 AM

Puuuuure speculation he isnt paying. I dont even know why people bother with side comments like these.

You can try billing the tenant monthly dues. Doesnt mean you will get them.

Actually, it isn't speculation. The tenant has told others in the community that she knows that the owner is in foreclosure/bankruptcy, that she isn't techically supposed to be living there, but is going to ride it out as long as she can.

GlenL (Ohio)
Posts: 5,491

Posted:

If you really want to throw a monkey wrench into the mix, you could notify the bankruptcy court that he has a tenant living in the unit.

Studies show that 5 out of 4 people have problems with fractions

MsM (Florida)
Posts: 5

Posted:

Quote:

Posted By GlenL on 09/06/2012 12:10 PM
If you really want to throw a monkey wrench into the mix, you could notify the bankruptcy court that he has a tenant living in the unit.

That was essentially one of the other options we discussed as a board. It has been 7-8 months since the initial bankruptcy filing, and we discussed petitioning the judge to remove the stay on the foreclosure since he stopped paying both his mortgage and HOA dues in 2007 sometime, and just recently filed for bankruptcy after at least 2 other foreclosure judgements, and the loss of a civil suit as well.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Msm

You cannot get blood out of a stone as far as the owner is concerned so I would explore what/how you might could get from of the tenant. I belive in some states an association can go directly after the tenant for association dues. The tenant might just satrt paying the dues plus any penalty if it is cheaper for them then having the association go after them.

Hope this helps.

PaulT6 (California)
Posts: 409

Posted:

Quote:

Posted By JohnC46 on 09/06/2012 12:56 PM
Msm

You cannot get blood out of a stone as far as the owner is concerned so I would explore what/how you might could get from of the tenant. I belive in some states an association can go directly after the tenant for association dues. The tenant might just satrt paying the dues plus any penalty if it is cheaper for them then having the association go after them.

Hope this helps.

John,

Interesting concept. I am wondering what connection the Assn can make with a tennant
where the Assn doesn't even own the unit. I would think the only thing the Assn could do would be to lien the property, owned by the Member, not the tennant?

Paul T

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Paul

The "snake" that likes Margueritas with no salt, first raised the possibilty......LOL

Mel gets the credit.

CarolF (Florida)
Posts: 435

Posted:

(11)(a) If the unit is occupied by a tenant and the unit owner is delinquent in paying any monetary obligation due to the association, the association may make a written demand that the tenant pay to the association the subsequent rental payments and continue to make such payments until all monetary obligations of the unit owner related to the unit have been paid in full to the association. The tenant must pay the monetary obligations to the association until the association releases the tenant or the tenant discontinues tenancy in the unit.
1. The association must provide the tenant a notice, by hand delivery or United States mail, in substantially the following form:

Pursuant to section 718.116(11), Florida Statutes, the association demands that you pay your rent directly to the condominium association and continue doing so until the association notifies you otherwise.

Payment due the condominium association may be in the same form as you paid your landlord and must be sent by United States mail or hand delivery to (full address) , payable to (name) .

Your obligation to pay your rent to the association begins immediately, unless you have already paid rent to your landlord for the current period before receiving this notice. In that case, you must provide the association written proof of your payment within 14 days after receiving this notice and your obligation to pay rent to the association would then begin with the next rental period.

Pursuant to section 718.116(11), Florida Statutes, your payment of rent to the association gives you complete immunity from any claim for the rent by your landlord for all amounts timely paid to the association.
2. The association must mail written notice to the unit owner of the association’s demand that the tenant make payments to the association.
3. The association shall, upon request, provide the tenant with written receipts for payments made.
4. A tenant is immune from any claim by the landlord or unit owner related to the rent timely paid to the association after the association has made written demand.
(b) If the tenant paid rent to the landlord or unit owner for a given rental period before receiving the demand from the association and provides written evidence to the association of having paid the rent within 14 days after receiving the demand, the tenant shall begin making rental payments to the association for the following rental period and shall continue making rental payments to the association to be credited against the monetary obligations of the unit owner until the association releases the tenant or the tenant discontinues tenancy in the unit.
(c) The liability of the tenant may not exceed the amount due from the tenant to the tenant’s landlord. The tenant’s landlord shall provide the tenant a credit against rents due to the landlord in the amount of moneys paid to the association.
(d) The association may issue notice under s. 83.56 and sue for eviction under ss. 83.59-83.625 as if the association were a landlord under part II of chapter 83 if the tenant fails to pay a required payment to the association after written demand has been made to the tenant. However, the association is not otherwise considered a landlord under chapter 83 and specifically has no obligations under s. 83.51.
(e) The tenant does not, by virtue of payment of monetary obligations to the association, have any of the rights of a unit owner to vote in any election or to examine the books and records of the association.
(f) A court may supersede the effect of this subsection by appointing a receiver.

PaulT6 (California)
Posts: 409

Posted:

Quote:

Posted By CarolF on 09/06/2012 1:55 PM
(11)(a) If the unit is occupied by a tenant and the unit owner is delinquent in paying any monetary obligation due to the association, the association may make a written demand that the tenant pay to the association the subsequent rental payments and continue to make such payments until all monetary obligations of the unit owner related to the unit have been paid in full to the association. The tenant must pay the monetary obligations to the association until the association releases the tenant or the tenant discontinues tenancy in the unit.
1. The association must provide the tenant a notice, by hand delivery or United States mail, in substantially the following form:

Pursuant to section 718.116(11), Florida Statutes, the association demands that you pay your rent directly to the condominium association and continue doing so until the association notifies you otherwise.

Payment due the condominium association may be in the same form as you paid your landlord and must be sent by United States mail or hand delivery to (full address) , payable to (name) .

Your obligation to pay your rent to the association begins immediately, unless you have already paid rent to your landlord for the current period before receiving this notice. In that case, you must provide the association written proof of your payment within 14 days after receiving this notice and your obligation to pay rent to the association would then begin with the next rental period.

Pursuant to section 718.116(11), Florida Statutes, your payment of rent to the association gives you complete immunity from any claim for the rent by your landlord for all amounts timely paid to the association.
2. The association must mail written notice to the unit owner of the association’s demand that the tenant make payments to the association.
3. The association shall, upon request, provide the tenant with written receipts for payments made.
4. A tenant is immune from any claim by the landlord or unit owner related to the rent timely paid to the association after the association has made written demand.
(b) If the tenant paid rent to the landlord or unit owner for a given rental period before receiving the demand from the association and provides written evidence to the association of having paid the rent within 14 days after receiving the demand, the tenant shall begin making rental payments to the association for the following rental period and shall continue making rental payments to the association to be credited against the monetary obligations of the unit owner until the association releases the tenant or the tenant discontinues tenancy in the unit.
(c) The liability of the tenant may not exceed the amount due from the tenant to the tenant’s landlord. The tenant’s landlord shall provide the tenant a credit against rents due to the landlord in the amount of moneys paid to the association.
(d) The association may issue notice under s. 83.56 and sue for eviction under ss. 83.59-83.625 as if the association were a landlord under part II of chapter 83 if the tenant fails to pay a required payment to the association after written demand has been made to the tenant. However, the association is not otherwise considered a landlord under chapter 83 and specifically has no obligations under s. 83.51.
(e) The tenant does not, by virtue of payment of monetary obligations to the association, have any of the rights of a unit owner to vote in any election or to examine the books and records of the association.
(f) A court may supersede the effect of this subsection by appointing a receiver.

Carol,

Very interesting!! I had no idea anything like that existed. I doubt that would ever fly in California? If I was a renter in Florida I think I would look for a rental unit NOT in an HOA.

Thanks for the info, Paul T

PaulT6 (California)
Posts: 409

Posted:

Carol,

Forgot this, would it apply if the owner was in bankruptcy?

Paul T

GlenL (Ohio)
Posts: 5,491

Posted:

Paul as I posted earlier, I don't think they can use it to go after pre-bankruptcy amounts but they can use it to go after amounts owed after the filing.

BTW I know of one HOA in Virginia that requires specific language in all leases that allow the HOA the same right to require tenants to pay and landlords to accept the lower amount of rent as payment in full.

Studies show that 5 out of 4 people have problems with fractions

LarryB13 (Arizona)
Posts: 4,099

Posted:

Mike,

I see a trend with your board that is not healthy.

You wrote that the owner of the unit had not paid assessments in such a long time that you are not even sure exactly what year he stopped paying. You said maybe 2007. This is September 2012. You indicated that as of seven months ago, your foreclosure action was not yet compete and was interrupted by the bankruptcy filing. If I understand your posts, your board has still not decided on a course of action. You also stated that "Our HOA management company and the association's attorney haven't really made this a priority."

What exactly are you people waiting for? If your attorney and management company are not making your needs their priority, fire the bastards and find someone who will respond.

You and the rest of the board have a duty to the rest of the owners to get off your dead butts and do something instead of waiting for non-responsive third parties to act. Your president should have consulted with an attorney seven months ago and laid out a plan of action to resolve this matter.

MsM (Florida)
Posts: 5

Posted:

Quote:

Posted By LarryB13 on 09/06/2012 9:23 PM
Mike,

I see a trend with your board that is not healthy.

You wrote that the owner of the unit had not paid assessments in such a long time that you are not even sure exactly what year he stopped paying. You said maybe 2007. This is September 2012. You indicated that as of seven months ago, your foreclosure action was not yet compete and was interrupted by the bankruptcy filing. If I understand your posts, your board has still not decided on a course of action. You also stated that "Our HOA management company and the association's attorney haven't really made this a priority."

What exactly are you people waiting for? If your attorney and management company are not making your needs their priority, fire the bastards and find someone who will respond.

You and the rest of the board have a duty to the rest of the owners to get off your dead butts and do something instead of waiting for non-responsive third parties to act. Your president should have consulted with an attorney seven months ago and laid out a plan of action to resolve this matter.

I completley understand where you are coming from. The condominium was established in 2006, and was under developer control until fall of 2009. When the property owner in question stopped paying both his mortgage and the HOA dues, it was 2007/2008 or so, and since the condominium was still under developer control, he (developer) chose not to puruse the delinquent HOA dues because "the foreclosure process would take care of it" - essentially meaning he didn't want to deal with all the legal fees/hassle, etc. I did not join the board until the beginning of 2011, mainly becuase I am one of 4, maybe 5 owners that still occupies their unit out of all 32. The rest are all rentals - 16 of them are owned by one individual who purchased them from the developer for less than the price of most cars for sale today.

The delinquent property owner in question had a loan from Countrywide, which most of us know was one of the worst in terms of subprime lending. His foreclosure, for whatever reason, got "lost in the shuffle" with all the others and the acquisition by BOA as well. Finally, last year, the HOA attorney got with the attorney for the lender and pushed the foreclosure through, and the final judgement was issued in December of 2011, with an auction of the property scheduled for January 2012. The HOA thought this was the end - that the property would be aucitoned, squatting tenant evicted, and new owners in place. Within days before the auction was scheduled, the owner filed bankruptcy and everything came to a screeching halt. Our legal counsels current position is that "nothing can be done" until he is discharged from bankruptcy, which could be dragged out for who knows how long.

I'm not trying to justify any of these actions, I'm just providing the details on how we got here. I would love to fire the management company, but then we're on the hook for the remainder of their contract, which is 6-8 months I believe. What's worse is that we just switched to this company becuase the last one was just as non-responsive.

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

Quote:

You also stated that "Our HOA management company and the association's attorney haven't really made this a priority."

Seems there is poor communication.

If the person is in the bankruptcy process, the HOA mgmt company and the attorney need to tell you, there is NOTHING that can be done until bankruptcy is discharged. They need to tell you that.

MsM (Florida)
Posts: 5

Posted:

Quote:

Posted By SteveM9 on 09/07/2012 5:58 AM

You also stated that "Our HOA management company and the association's attorney haven't really made this a priority."

We know that the owner has filed for bankruptcy, that's why the foreclosure auction never took place. My original question was: Can we collect HOA dues from the tenant while the owner is in bankruptcy, or does the bankrupcy (and resulting stay on the foreclosure) prevent the association from even attempting to collect?

It blows my mind how someone is allowed to live for free in a unit for 3 years, continually cause disturbances in the community, and nobody can do anything about it because the owner is a deadbeat and is dragging the foreclosure/bankruptcy on as long as possible so their firend can continue to live for free (including free water that the association pays for) at the expense of the rest of us.

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

Quote:

My original question was: Can we collect HOA dues from the tenant while the owner is in bankruptcy, or does the bankrupcy (and resulting stay on the foreclosure) prevent the association from even attempting to collect?

Yes, in Florida, an association can collect dues directly from the occupant (renter). Search around for how to do it.

Hint. As for the water, you cant legally shut his water off, but you can slow it down to a trickle. And then forget to repair it. See how long he stays after you do that.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Thanks Florida people who knew this rule for posting it! I knew you would come through!

. The issue with the bankruptsy filing of the owner seems to be the issue here. I don't believe HOA dues are forgiveable through bankruptsy. I could very well be wrong on this but they are considered similar to utility payments or gym memberships. So I would not assume that the debt to the HOA is necessarily part of the bankruptsy process. It may depend on what chapter of filing the bankruptsy is. The lien should be in place. Which the lien should cover the legal bill of filing, late fees, interest at a legal rate, and the amount owed from the date stopped paying.

The HOA can indeed stop the bleeding by foreclosing. Now there are a few caveats to this. The HOA is doing the work of the bank and most likely will never see a dime from it. Plus the HOA does NOT want to own this home. They will need to make sure to pass the word out for potential buyers when the actual bidding process takes place to unload it. The starting bid will be at the amount owed the HOA plus $1. If there is still a mortgage on it, then that person will have to pick up that mortgage too. Hence why the HOA should NEVER pick up this house in the foreclosure.

I've done a foreclosure for somewhat similar circumstances. It is a pretty aggressive step but not that expensive. It cost us about 800 dollars in legal fees and such. About 6 months altogether for the whole process. It's best to get a lawyer that knows how to handle foreclosures. That does NOT mean a Real Estate attorney. A general practice can probably do it.

Remember the HOA is doing the work of the bank if they conduct the foreclosure. They are also just stopping the bleeding. The new owners will have a clean slate when they buy. Meaning the HOA can NOT put any previous burden on them. They start from the day they purchase the home for paying dues.

Former HOA President

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Thanks Florida people who knew this rule for posting it! I knew you would come through!

Former HOA President

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