Delinquent HOA dues

I am a fairly new board member, serving as the treasurer on my hoa board in South Carolina. We have a huge delinquent hoa dues problem. Currently we have over $50,000.00 and climbing in delinquent dues that is owed to our hoa. Our property manager and attorney have reviewed our collection procedure with me, which consists of sending a letter out to the owner involved when they are 60 days delinquent and shutting off the cable TV (supplied by the HOA) and a having lien placed on the unit when they are 90 days delinquent. That is as far as they tell they can go in attempting to collect the delinquent dues. Apparently all the delinquent units have mortgages. but the banks are not rushing to foreclose, which leads me to believe that the owners involved are paying their mortgages, but not their hoa dues. Our attorney tells me that the banks will not allow us to act on the lien and sell the unit at sheriff's sale to recover the money owed to us. I had advocated shutting off the water to the unit( also supplied as a hoa benefit) after being delinquent 90 days, but the property manager, attorney, and most of the board were opposed. I was wondering if there are any boards who have successful collection strategies that have worked for them. We recently had to raise our monthly hoa dues to meet our operating expenses. Recovery of this huge debt would go a long way to help prevent any future increases.

I wasn't aware that the Banks could actually stop you.

You wouldn't get any of the money as it would all go to the bank (since their lien trumps yours) but you would stop the bleeding and hopefully get someone to purchase the property who will start paying assessments.

OK, let me clarify, I am on a board in Pennsylvania also where they allow Sheriff's sales, I am not sure they are allowed in SC. Our property manager told me in SC the banks there will not allow us to foreclose because their lien trumps ours. I could never quite understand how they could do that except that during the housing bubble bust when property values were down, they would not be able to recover what was owed on the property after deducting the delinquent hoa dues that were owed.

Steve is correct.

Tell the PM that due to the delinquency issue you might need to let them go and be self managed. Then see if the PM will tell you something different.

Ditto for the attorney! "Sorry, Matlock, but we are so far in the hole we cannot afford your advice any more."

Mathew what you described is awfully illegal and a really bad idea. The bank even in a HOA foreclosure still is paid first and foremost. A HOA foreclosure just does the work of the bank. A HOA should never ever ever EVER own the property nor be in the business of renting the property out. These are things we preach on here repeatedly for the HOA NOT to ever ever do. The ramifications are too expensive and the HOA is NOT in the real estate business.

No matter if you sue (another really bad idea), lien, or foreclose those options will never guarantee the money for the HOA. They are just "stop the bleeding" measures to hope a new buyer comes in and starts paying their fair share.

Actually, Melissa, I saw a speaker several months ago at an HOA seminar put on by a very respectable firm. I think the speaker represented a MC, but can't quite remember. He suggested that HOAs buy these properties, rent them out, etc., until they sell. He covered the pros & cons really well, but I didn't pay a lot of attention to him as our HOA has no need to do that. I do recall that the speaker said that the HOAs sometimes even rent the houses to the delinquent owners.

I'm positive he would't have suggested it if it were "illegal." Please cite your source, Melissa, about the illegality of this activity.

Well client... The HOA does not get title in a foreclosure. The bank still owns the property. So if the HOA was to rent the property out, all the rent collected could belong to the bank. So when they do foreclose and find people living in the place they will not be happy.

The HOA is still on the hook to pay the HOA dues. Who gets the vote of that property? Not the tenant as they are renters not members. The HOA would have to make mortgage payments if they owned it, have insurance, pay maintenance, and any cost associated with having rental property. Plus they could not make the tenant follow the HOA rules unless you have it in the contract.

I just do not think it is ever a good idea for a HOA to own a foreclosed property. It sounds too much like drinking a seminar cool aid. They do not always give the details.... It is all in the details.

Bill,

You can foreclose the deed but it will leave the bank lien (mortgage) on the property. The bank will then demand the money it's owed on the mortgage and begin foreclosure to seize the property. However, the non-payer will leave the property because the deed will go to the HOA. But you don't want to own the property and keep it.

I've been through this experience and it's not pleasant. It's a step-by-step process for which you'll pay a lawyer dearly (do not do this in a self-managed way). However, the one time experience became known in the community and improved our collections.

We can't lose sight of the fact that people who pay their dues diligently deserve protection from paying into an HOA operation rendered defunct because it won't go after non-payers.

Carol my comment was not directed to you. Kelly I too have been down this road. Your right it does send the message to pay up. That is all that truly comes out of the deal. People do not realize the reality of it all. It took 6 months alone to process our foreclosure. It was another couple of years before that house ever was occupied legally again as HUD took it over. Taxes were not paid and tax liened as well.

So 3 years spent on a house that had to remain empty while we had to mow the lawn and wait. The house broke a pipe and water damage everywhere. We could not begin to afford this house on our budget. Legally we could not even enter the place.

So you want people to pay up or get out. The reality of getting out means an empty house and even less payments coming in.

My association foreclosed on a property with a lender's lien and the sheriff executed a deed with our name on it.


The bank (or other lender) does not "own" the property until the court authorizes the sheriff to issue a deed naming the bank as owner. In fact, if the bank forecloses and the property sells at the sheriff's sale the bank never owns the property.


The bank has no claim on the rent unless they can obtain title. If they want the rent they can get off their dead butts and foreclose. Of course, they will then owe assessments from that date forward and need to maintain the place.


Gosh and golly gee! That is a real heartbreaker. Imagine all those unhappy bankers weeping and wailing. Did you know that bankers are like a Slinky? Not really useful for anything but pushing one down the steps brings a smile to your face.


Yes, the HOA would end up paying itself out of the rent it collects, which is better than getting nothing. And yes, it would have some costs to contend with in order to have a rentable property. But this is preferable to having a property that consumes HOA resources and contributes zero.

Don't know about your state, but in mine in theory the mortgage becomes payable in full within 30 days. Guess what happens then? The bank gets to foreclose! Just like they could have and did not for the last umpteen months.

But oh, silly me! Why here I have this property all rented out and forgot to write up a lease that requires the tenant to follow the rules. By golly, we are all so stooopit!


Guess what? I do not really like idea either but it is the lesser of many evils created by those who cannot or will not follow through on their obligations. I have never attended a get-rich-quick seminar so I have not drunk any of their cool-aid. The details are available all around you if you search for them.

Still hard to report unpaid HOA dues to the credit companies considering the HOA has no right to people's social security numbers to do such things. Hence, why a lien is the best option to file. Even without the SS# when they try to sell it will pop up.

Florida has some unusual statutes that allow this to work. The law in FL is that when assessments are owed, the current owner and the previous owner(s) become liable for the debt. So once the bank is forced to take ownership, it then becomes liable for all unpaid assessments and the costs of trying to collect them.

This perfectly sums up the whole issue.

Not in Nevada, HOA's have super priority over banks.. There was a state supreme court case that went in the investors favor
that were snapping up HOA foreclosed properties typically 200K properties for 15k or less and the bank gets snuffed out..
This law needs to be changed but the HOA lobby has a strong hold in the Nevada legislature..