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Tax Deed sale Via quitclaim

Started by DavidB31 • 31 replies • 5424 views

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DavidB31 (Florida)
Posts: 21
Posted:
I'm in the process of buying another property via quitclaim deed, the price is 40%-60% below market value because of liens that was placed by the condo association. The property was sold via tax deed sale on 6/21/2010, one year later on 6/7/2011 the condo placed a lien for past due fees since 2006. I'm I responsible for the previous fees in a Tax deed sale? or only for fees after the sale?

GlenL (Ohio)
Posts: 5,491
Posted:
David not only may you be held responsible for any unpaid liens but also unpaid interest and attorney fees. This is not a DIY project, get your attorney involved. To read about another posters experiences with the FL Assessment Law go here: http://www.hoatalk.com/Forum/tabid/55/forumid/1/postid/146045/view/topic/Default.aspx
Studies show that 5 out of 4 people have problems with fractions
TimB4 (Tennessee)
Posts: 21,059
Posted:
David,

As Glen pointed out, FL law incumbers all unpaid assessment debts on the buyer and then it's up to the buyer to go after the previous owner (vs. the Association doing it).

Here are links to the applicable law:

FL 720.3085 applicable to property in Homeowner Associations.

FL 718.116 applicable to property in Condominium Associations.

Here is the language in those statutes (which is effectively the same for both except for substituting parcel owner for unit owner) [emphasis added]:

A unit owner, regardless of how his or her title has been acquired, including by purchase at a foreclosure sale or by deed in lieu of foreclosure, is liable for all assessments which come due while he or she is the unit owner. Additionally, a unit owner is jointly and severally liable with the previous owner for all unpaid assessments that came due up to the time of transfer of title. This liability is without prejudice to any right the owner may have to recover from the previous owner the amounts paid by the owner.
JayP3 (Florida)
Posts: 154
Posted:
Definately seek legal advice. Here is an interesting article:

http://henryhickslaw.com/legal-services/tax-deeds
DavidB31 (Florida)
Posts: 21
Posted:
found this while reading about tax deed sale.

F.S. 197.552 provides that "[e]xcept as specifically provided in this chapter, no right, interest, restriction, or other covenant shall survive the issuance of a tax deed, except that a lien of record held by a municipal or county governmental unit, special district, or community development district, when such lien is not satisfied as of the disbursement of proceeds of sale under the provisions of s. 197.582, shall survive the issuance of a tax deed." Also, case law states that an association's lien does not survive a tax deed sale.

The clerk is required to provide notice of the tax deed sale to all parties with an interest in the property. As I recall, the only basis for claiming that an interest (such as a lien) survives the issuance of a tax deed sale is the clerk's failure to provide the interested party with notice of the tax deed sale.
TimB4 (Tennessee)
Posts: 21,059
Posted:
David,

From what I'm reading in FL 720 and FL 718, your responsible for those debts regardless if there was a lien or not.

As others have said, you need to consult with a local attorney versed in property law.
DavidB31 (Florida)
Posts: 21
Posted:
yeah I have a meeting with the attorney Tues, he told me that he successfully argued a case in local court and won when it was a tax deed sale. He even mentioned that until recently he didn't know that tax deed sales was exempt from lien except the ones mentioned in F.S. 197.552
DavidB31 (Florida)
Posts: 21
Posted:
quoted from:
http://www.chriswickersham.com/wordpress/florida-tax-deeds-vs-hoa-or-condo-association-liens-and-assessments/

To start first with the tax deed, the association argued there is an inherent conflict between Chapters 197 and 718, where 718.116 contains language stating that any successor in title is personally liable for any debts the former owners owed to the association, ”regardles of how his or her title has been acquired” which, it argued, must include tax deeds.

The problem is, that really doesn’t apply to tax deeds. F.S. 197.552 plainly states that the survival of any debt or lien through a tax deed is governed exclusively by Chapter 197, and the legislature would have had to amend Chapter 197, not Chapters 718 or 720, in order to allow for the survival of association debts through tax deeds. The legislature did not do so, and any argument about any language contained in 718 or 720 somehow altering the survival of debts through tax deeds is inapplicable, where 197.552 established that Chapter 197 is the sole vehicle for determining the survival of debts through tax deeds.
TimB4 (Tennessee)
Posts: 21,059
Posted:
David,

I'm not an attorney. You may be right, you may be wrong. I just don't know.
At the very least, even if you are right, you may need to have an attorney write the Association explaining it to them so the Association doesn't take you to court. A few hundred spent now for a local attorney to look at the issue and write a letter is far far cheaper than defending yourself in court.

What you are asking is a legal question. Therefore, you need to seek out legal advice which won't be on this website.
DavidB31 (Florida)
Posts: 21
Posted:
Quote:
Posted By TimB4 on 01/18/2013 5:08 PM
David,

I'm not an attorney. You may be right, you may be wrong. I just don't know.
At the very least, even if you are right, you may need to have an attorney write the Association explaining it to them so the Association doesn't take you to court. A few hundred spent now for a local attorney to look at the issue and write a letter is far far cheaper than defending yourself in court.

What you are asking is a legal question. Therefore, you need to seek out legal advice which won't be on this website.

I'll update you guys on the progress, I'm going to take the risk of buying the unit, even if I ended up paying all the association fees $25k I'll still be below market value.
JayP3 (Florida)
Posts: 154
Posted:
Agreed.

Other superior state statutes 'stacked the deck' to insure it get its money (duh) be damned of any inferior liens (CoA, HoA, etc.) Looks good for you prior to the tax deed sale. After???

Then you have to deal with the warranty deed issue for 4 years???.

One must look beyond 718 or 720.

SteveM9 (Massachusetts)
Posts: 3,699
Posted:
Its worth getting a lawyer. If you plan on flipping it, you may need to settle or pay. The HOA could drag this out for years, and in that time, no bank will give anyone a loan to buy over a property that is currently in a lawsuit.
LarryB13 (Arizona)
Posts: 4,099
Posted:
David,

The other issue you raised in your original post has not been addressed so far: a quitclaim deed.

You should also discuss the legality of this deed form with your attorney when you consult with him. There are many types of deeds and a quitclaim is correct for some situations and wrong for others.

My understanding of the correct use of a quitclaim deed is when one of multiple owners of a property sells or surrenders his interest to one of the other owners. The key is that both the grantor and grantee must be owners already. The use of the wrong form of deed may never cause a problem or it may land you in the middle of a quiet-title action, so it is best that the proper form of deed be used from the outset.

MelissaP1 (Alabama)
Posts: 13,836
Posted:
Are you going to pay cash or get a loan from the bank for this purchase? You may want to check out what is best for you on this aspect. I try to avoid paying straight cash for a home if at all possible. It's usually best to always get a loan for a home even if you can afford to pay for it straight out. It helps in many ways and can provide more protection to you. This includes tax ramifications and possibly title issues.

I see alot of "House flippers" posting on here with similar issues. Good deal from a foreclosure/tax lien/HOA foreclosure etc...However, they always end up at a lawyers office sorting out title, ownership, and HOA issues. I myself tried to get into the house flipping game a few years ago. Now living in the one I planned to flip... Housing market dropped, repairs mounted, and renter didn't pay rent for several months on my other property...The reality of house flipping kicked in. Got a great deal though!

So I caution you on this purchase on many levels...You need to realize you will be a HOA member once you make this purchase. Which makes you part of your own enemy if they were to force you to cough up the money of back dues. Owners won't like the idea you making this home a rental property if that is is your goal. Expect some tension from this. Having paid this from a regular mortgage can help you credit wise. Keep in mind though that purchasing at such a low amount does drive down other homes in the area resale values down. They based home values NOT on it being in a HOA, but on what similar houses sale for in the general few mile radius and do include foreclosure type sales. Just so you know that the appraisal of your new purchase may effect values not intentionally and will have to give it atleast 6 months for it to shake out of the system to make values go back up. So plan on keepiing this property for atleast a year....

Just some areas to consider besides the dollar signs...
Former HOA President
DavidB31 (Florida)
Posts: 21
Posted:
Quote:
Posted By MelissaP1 on 01/19/2013 4:31 AM
Are you going to pay cash or get a loan from the bank for this purchase? You may want to check out what is best for you on this aspect. I try to avoid paying straight cash for a home if at all possible. It's usually best to always get a loan for a home even if you can afford to pay for it straight out. It helps in many ways and can provide more protection to you. This includes tax ramifications and possibly title issues.

I see alot of "House flippers" posting on here with similar issues. Good deal from a foreclosure/tax lien/HOA foreclosure etc...However, they always end up at a lawyers office sorting out title, ownership, and HOA issues. I myself tried to get into the house flipping game a few years ago. Now living in the one I planned to flip... Housing market dropped, repairs mounted, and renter didn't pay rent for several months on my other property...The reality of house flipping kicked in. Got a great deal though!

So I caution you on this purchase on many levels...You need to realize you will be a HOA member once you make this purchase. Which makes you part of your own enemy if they were to force you to cough up the money of back dues. Owners won't like the idea you making this home a rental property if that is is your goal. Expect some tension from this. Having paid this from a regular mortgage can help you credit wise. Keep in mind though that purchasing at such a low amount does drive down other homes in the area resale values down. They based home values NOT on it being in a HOA, but on what similar houses sale for in the general few mile radius and do include foreclosure type sales. Just so you know that the appraisal of your new purchase may effect values not intentionally and will have to give it atleast 6 months for it to shake out of the system to make values go back up. So plan on keepiing this property for atleast a year....

Just some areas to consider besides the dollar signs...

I buy all my properties Cash, I intend to keep them at-least 10-15yrs, Rental is allowed in the communities I buy so renting wont be an issue, I'll try my best to screen and re-screen my renters so hopefully I dont have to deal with too many delinquent renters. So far I have 11 properties 8 rented flipping 2 and repairing 1. I also add mortgages to each property from one of my corporation so just in case someone tries to foreclose I'll be the first lein holder.
SteveM9 (Massachusetts)
Posts: 3,699
Posted:
If city foreclosures wipe liens, and HOA liens are still owed before the lien holder, and the place is paid for..... who would foreclose?
DavidB31 (Florida)
Posts: 21
Posted:
Quote:
Posted By SteveM9 on 01/19/2013 10:51 AM
If city foreclosures wipe liens, and HOA liens are still owed before the lien holder, and the place is paid for..... who would foreclose?

its really just an extra step just incase stuff happen. Hoa might sue me for something,
KellyM3 (North Carolina)
Posts: 2,239
Posted:
Okay, a lawyer is a "Must" in this situation.

Foreclosures and auctions are meant to clear a deed so a property can roll to new ownership. Allowing an HOA to file a lien, post-foreclosure, one year after the tax sale violates the very reason foreclosure exists. Otherwise, foreclosure has no meaning in clearing a deed of a delinquent payer and there's no incentive for new owners to find distress properties.

This HOA is really foolish in its tactics for the betterment of the entire community.
CarolF (Florida)
Posts: 435
Posted:
Kelly - this was a tax deed sale - for non payment of real estate taxes to the county, not a foreclosure filed by the bank. This tax deed sale stuff in Florida has some very quirky rules.
JohnC46 (South Carolina)
Posts: 14,265
Posted:
Quote:
Posted By CarolF on 01/20/2013 2:31 PM
Kelly - this was a tax deed sale - for non payment of real estate taxes to the county, not a foreclosure filed by the bank. This tax deed sale stuff in Florida has some very quirky rules.

As does FL have quirky rules about association living.
ChrisK6 (Florida)
Posts: 1
Posted:
DavidB31: Any update to this my friend? I'm located here in Florida and I'm going through the same situation. One of my properties has a disorganized HOA so I rolled the dice and did the quiet title ASAP. We shall see. I'd like to discuss this directly with you, if possible. Shoot me an email and let's talk. If we can get a precedent set we could save some cash on future purchases. [email protected]
DavidB31 (Florida)
Posts: 21
Posted:
Chris check your email.
ElaineS2 (California)
Posts: 47
Posted:


" I buy all my properties Cash, I intend to keep them at-least 10-15yrs, Rental is allowed in the communities I buy so renting wont be an issue, I'll try my best to screen and re-screen my renters so hopefully I dont have to deal with too many delinquent renters. So far I have 11 properties 8 rented flipping 2 and repairing 1. I also add mortgages to each property from one of my corporation so just in case someone tries to foreclose I'll be the first lein holder."

David-

Are most of your rental properties in developments with HOAs? How about your own home? Have you ever served on the Board? Do you have time to attend meetings at any of your properties?

You are obviously a sophisticated investor, and I think you realize that you will need to get competent legal advice beyond the scope of this chatboard regarding your current purchase; but I believe that most posters here, even those of us who own a couple of properties, also live in communities with HOAs and deal with issues of governance. Your viewpoint could be helpful if you'd care to share it.

I'm curious about whether you base ony of your investment decisions on disclosure requirements the individual HOAs may have, or is this not an issue for you. Generally, how much information are you expected to provide on your renters after you have bought a property in a community with an HOA? Is it a burden keeping that info. updated? What are the best practices regarding management of renters by an HOA from the perspective of an active and successful investor/landlord?

Thanks.
MillieS1 (Florida)
Posts: 1
Posted:
David, what did you find out from your atty visit re HOA dues surviving a tax deed sale?
[email protected]

Thanks!
DavidB31 (Florida)
Posts: 21
Posted:
Quote:
Posted By MillieS1 on 08/07/2013 8:18 AM
David, what did you find out from your atty visit re HOA dues surviving a tax deed sale?
[email protected]

Thanks!

tax deed wipe out all Hoa fees in florida. It will not wipe out city/county/irs liens
StefanK1 (Florida)
Posts: 4
Posted:
David - might be dealing with the same issue. I was wondering if you could let me know which lawyer you used and how much it cost? Also, was your lawyer able to work this out directly with the HOA or did you have to go to court?
SusanM22 (Florida)
Posts: 154
Posted:
David and Stefan in FLORIDA. You may want to check the following legal blog about recent Florida 2nd DCA ruling. Your attorneys could be out of the loop about Florida Case Law. The way I see it is that you may be "jointly and severally" liable to the condo association for its assessment lien IF the lien was recorded after the 1st tax deed auction. What about existing mortgages on the condo, if any ? Title may be "clouded."

http://davidged.tumblr.com/post/63466336085/community-associations-liens-for-unpaid-assessments#!

PS. I am addressing the 2 FL posters and no one else. I am always curious about how "flippers" operate in the sunshine state.
StefanK1 (Florida)
Posts: 4
Posted:
Susan - thanks for posting the link. I actually found the court document for this case a little earlier today. The lawyer on the tax deed purchaser's side was Henry Hicks. I was happy to see the appelate court rule in his favor. It sets precedent, plus he's the lawyer I would use for quiet title and seems to have quite a grasp on this stuff.

I can't get the link to work but if you Google "Henry Hicks and HOA Tax Deed" it's the first thing that comes up.
SusanM22 (Florida)
Posts: 154
Posted:
Hi Stefan. I just did and it is the same Appeal case I was referring to. I guess the scheme works because there is NO transfer of Title, only a series of QCDs. That is interesting.
StefanK1 (Florida)
Posts: 4
Posted:
My understanding of the document is that it's not a transfer of title because a tax deed is the creation of new title, not a transfer of title from one owner to another. Sounds like the county takes the property, disgards the old title and a "new" title is born and they pass the property to the next owner (purchaser at the tax deed sale)with that "new" title.
SusanM22 (Florida)
Posts: 154
Posted:
Uhmm...I would not be so sure about the "new Title" theory.

This is a quote from the Broward county website:

"Is the property sold free and clear of liens?
No. Additional property taxes, as well as, liens on the property may be due and would become the responsibility of the new owner. It is imperative that anyone interested in participating in the Tax Deed sale conduct extensive research including a full title and lien search prior to bidding on any properties. Government liens follow the property. Vacant property may have lot clearing, code and other liens attached to it."
StefanK1 (Florida)
Posts: 4
Posted:
I was referencing the appelate courts wording:

"And it is well-settled that a tax deed does not represent a transfer of title but constitutes the commencement of a "new, original and paramount" title. Blume v. Giles, 197 So. 344, 346 (Fla. 1940); see also Dean v. Kane,143 So. 656, 657 (Fla. 1932) (holding that a tax title "creates in the purchaser a new
and original title entirely disconnected with that of the former owner")."

Understood that this does not apply to government issued liens. I think it's important to do a title search before the auction to determine if there are any government liens and if so if the overbid will cover them. What this ruling does is hopefully settle the issue between the FL statutes for tax deed sales and the FL statutes for HOAs/COAs. IMO what might have been a sizeable amount of money to fight the HOA in court that needed to be in your profit metrics on a tax deed property could soon be a small amount and some day not be something you need to include in the calculations.

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