Junior Lien and forgiving debt

BonnieG1 (Nebraska)
Posts: 1,186

Posted:

An owner let his unit go to a nursing home where his mother resided before she died. The nursing home put a lien on the unit and a short time after we put a lien on the unit for unpaid assessment fees in the amount of $300.00. Now the fees are over $1,000.00. We would not have put a lien on so soon, but this owner had a history of nonpayment. We removed a lien on his unit last year. I am thinking maybe we should not have removed it.

The nursing home auctioned off the unit. It is my understanding the the man who owned the unit prior to the nursing home owning it due to the lien is responsible for the fees until ownership changed hands.

Now the lady who won the auction does not want to pay any of the back fees.

Our new President does not want to forgive any amount of the fee due to our fiduciary responsiblity. But I did email her and told her that in my opinion if we don't forgive at least a part of the past fee, we may be out more money that if we try to collect all of the back fee.

I know there are many knowledgable people on this site and I would like to know what you think/

Since my home computer is on the blink, it may be a while before I can respond to anyone. I am using a library computer now.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

You can not collect on the prior owners debt with the new owner. The new owner starts with a clean slate. The only state I know of different is Florida.

Your HOA most likely should have kept the lien on. However, that still did not guarantee the money. Your in line with all the other creditors they owe money to. The bank always being number 1 and foremost.

So leave this new owner alone and start collecting from this point forward.

Former HOA President

TimB4 (Tennessee)
Posts: 21,059

Posted:

The new owner begins to owe assessments from the auction forward.

The Associations lien, since it was junior, was erased at the auction.
Abolishing the lien does not abolish the previous owners debt. It simply removed one possible avenue of collecting that debt. The Association could still go after the previous owner though the courts or, if the previous owner was the individual who died, make a claim on the estate. The other option is to write off and forgive the debt. If this is done, the Association could gain some satisfaction by reporting the forgiven debt to the IRS (as the previous owner would then need to claim the forgiven debt as income).

BonnieG1 (Nebraska)
Posts: 1,186

Posted:

Melissa, I agree with you, but our current President doesn't see it that way and I don't know what we can do to convice he

BonnieG1 (Nebraska)
Posts: 1,186

Posted:

Quote:

Posted By TimB4 on 06/08/2013 9:45 AM
The new owner begins to owe assessments from the auction forward.

The Associations lien, since it was junior, was erased at the auction.
Abolishing the lien does not abolish the previous owners debt. It simply removed one possible avenue of collecting that debt. The Association could still go after the previous owner though the courts or, if the previous owner was the individual who died, make a claim on the estate. The other option is to write off and forgive the debt. If this is done, the Association could gain some satisfaction by reporting the forgiven debt to the IRS (as the previous owner would then need to claim the forgiven debt as income).

I like this suggestion also. I will mention it to our President.

SheliaH (Indiana)
Posts: 6,964

Posted:

Quote:

Posted By BonnieG1 on 06/08/2013 12:12 PM

Posted By TimB4 on 06/08/2013 9:45 AM
The new owner begins to owe assessments from the auction forward.

The Associations lien, since it was junior, was erased at the auction.
Abolishing the lien does not abolish the previous owners debt. It simply removed one possible avenue of collecting that debt. The Association could still go after the previous owner though the courts or, if the previous owner was the individual who died, make a claim on the estate. The other option is to write off and forgive the debt. If this is done, the Association could gain some satisfaction by reporting the forgiven debt to the IRS (as the previous owner would then need to claim the forgiven debt as income).

I like this suggestion also. I will mention it to our President.

I hope it isn't too late to file a claim against the estate. We had an owner that we'd issued a lien and later she filed for bankruptcy. Somewhere in between all that, the mortgage company started a foreclosure (I know, it was a hot mess!) And then she died.

An estate was opened, but unfortunately we didn't know she was dead until a year later and neither did our attorney (they didn't have skip tracing capability at the time, which is how they found out). You only have about 90 days or so to file a claim in probate court, otherwise you're SOL. Our major newspaper has shrunken so much, I rarely see legal notices in it, but I try to look from time to time in case this happens to another owner.

And yes, this is yet another reason we've since hired another attorney and are slowly closing out the accounts on this one

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

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Quote:

Posted By TimB4 on 06/08/2013 9:45 AM
The new owner begins to owe assessments from the auction forward.

The Associations lien, since it was junior, was erased at the auction.
Abolishing the lien does not abolish the previous owners debt. It simply removed one possible avenue of collecting that debt. The Association could still go after the previous owner though the courts or, if the previous owner was the individual who died, make a claim on the estate. The other option is to write off and forgive the debt. If this is done, the Association could gain some satisfaction by reporting the forgiven debt to the IRS (as the previous owner would then need to claim the forgiven debt as income).

I agree with what Tim has said but we come full circle back to what will it cost the association to go after the money from the prior owner or estate. We recently had this discussion in one of our getting ready to take the association over meetings.

One person was just so pig headed about liens being removed during a foreclosure even if not paid off. He refused to believe they were removed. He later told me that he had called his own attorney and asked him about this. He then went on about how the money is still owed and we could go after the prior owner. I said I agreed but then asked him what did he think it would cost us to go after a past owner who went into foreclosure and stiffed us for $1,200.00? He said but they owe us. I agreed again and suggested he ask his attorney what it would cost and our chances of collecting versus lose more money. I await his reply......LOL

CarolR11 (Colorado)
Posts: 2,563

Posted:

Bonnie, you might get an estimate from a collections attorney about what it may cost your HOA to try to get that $1,000. I think you'll find that your Board may not be fulfilling its fiduciary obligation if it DOES spend more to try to collect than what is owed.

Our collections attorneys did track down a couple of former owners for us and they both are paying that firm monthly. But they each owed well into five figures so it's worth it. One poor guy was hit hard by the recession and had other genuinely sad problems too. He has been sending us $100 per month for three years!!