HOA filed lien against new owner for previous owner's dues

Started by JE • 14 replies • 3093 views

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JE (Washington)
Posts: 2

Posted:

My colleague lives in WA state and in February 2013 purchased (through a realtor) an REO-home that had been foreclosed by the bank in 2012. Fast-forward several months and he is now getting ready to sell the home. The HOA has now filed a lien against him for past-due assessments (3-plus years' worth) owed by the owner who was foreclosed on.

It was my understanding that a bank foreclosure erases any previous liens (including HOA assessments). The CCRs say "assessments become a lien on the lot to which each membership is appurtenant, superior to all other liens, except liens of record prior to date of assessment, for general taxes and liens of any first mortgage or deed of trust."

The HOA insists that the 2012 bank foreclosure had no effect on the HOA's lien "if the lender did not give formal notice to the Association, which it seems it did not." (My colleague says there's nothing in the CCRs referencing "formal notice" from the bank.)

It's also my understanding that the new owner is not liable for the dues of the previous owner, and is only responsible for dues commencing from the time of possession.

My colleague's title report did not mention the existence of an HOA. HOA contends it should have been contacted by escrow to inquire about past dues.

My question: Is the new owner in any way liable for past owner's dues? If not, how shall he contest the lien? He doesn't want it to hold up the sale. He has filed a claim with title company but is not sure they will respond in timely fashion.

FredS7 (Arizona)
Posts: 927

Posted:

Lawyer time.

> He doesn't want it to hold up the sale.

That may be a forlorn hope at this point. The law will move at its own pace.

Has he received any bills or notices? If not that may be in his favor.

TimB4 (Tennessee)
Posts: 21,061

Posted:

Quote:

Posted By JE on 06/18/2013 7:43 PM

My question: Is the new owner in any way liable for past owner's dues?

I wouldn't think so. However, I'm not an attorney and every States lien laws vary.

Quote:

Posted By JE on 06/18/2013 7:43 PM

If not, how shall he contest the lien?

He should probably consult with an attorney.

MatthewW4 (Arizona)
Posts: 500

Posted:

JE,

Before we all go nuts with advice, what is the amount that the association claims is owed?

MatthewW4 (Arizona)
Posts: 500

Posted:

Quote:

Posted By JE on 06/18/2013 7:43 PM

He doesn't want it to hold up the sale.

Then don't hold up the sale. Pay everything under protest and sue about it later.

KevinK7 (Florida)
Posts: 1,343

Posted:

The covenant sounds very strange. I am not familiar with the laws of your state but for a covenant to basically make up its own rules stating the HOA's liens are above all else sounds unenforceable. Not to mention it is on old debt not accrued by the new owner.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

This is wishful thinking on the HOA's part. The only state that this may even apply is Florida which even I still have my doubts about in the translation of that ability. I would continue on with the sale if they are able to find a buyer. If the HOA goes ahead with the lien, then go through the process of protest with the court. The HOA has to go on the personal route to collect on the former owner and not on the property any more.

Many HOA's are misinformed and do the wrong thing mostly in ignorance. Once they are educated and realize their mistakes, they hopefully do not repeat them. However, it is time for a lawyer letter and making sure your state does not allow such collections.

Former HOA President

DwightT (Idaho)
Posts: 664

Posted:

I agree with the others that the HOA doesn't really have much to stand on, but I would also say that the title company screwed up big time. That is one of the reasons that you hire a title company and buy title insurance - to find outstanding liens and to have them covered in case they miss any. It might not hurt to get the title company involved too. Their attorneys might be able to help sort things out.

DavidW5 (North Carolina)
Posts: 565

Posted:

It is my understanding that the HOA would only have a claim if they had filed a lien on the property while it was still under the original owner's title. If they did not do so, then this is a case of "you snooze ... you lose".

JanellB
Posts: 8

Posted:

Quote:

Posted By JE on 06/18/2013 7:43 PM
My colleague lives in WA state and in February 2013 purchased (through a realtor) an REO-home that had been foreclosed by the bank in 2012. Fast-forward several months and he is now getting ready to sell the home. The HOA has now filed a lien against him for past-due assessments (3-plus years' worth) owed by the owner who was foreclosed on.

It was my understanding that a bank foreclosure erases any previous liens (including HOA assessments). The CCRs say "assessments become a lien on the lot to which each membership is appurtenant, superior to all other liens, except liens of record prior to date of assessment, for general taxes and liens of any first mortgage or deed of trust."

The HOA insists that the 2012 bank foreclosure had no effect on the HOA's lien "if the lender did not give formal notice to the Association, which it seems it did not." (My colleague says there's nothing in the CCRs referencing "formal notice" from the bank.)

It's also my understanding that the new owner is not liable for the dues of the previous owner, and is only responsible for dues commencing from the time of possession.

My colleague's title report did not mention the existence of an HOA. HOA contends it should have been contacted by escrow to inquire about past dues.

My question: Is the new owner in any way liable for past owner's dues? If not, how shall he contest the lien? He doesn't want it to hold up the sale. He has filed a claim with title company but is not sure they will respond in timely fashion.

With associations I have dealt with, I have seen the new owners pay off the existing liens on the home before title could even change hands. Also, I have seen the banks send in payments for past due assessments which amounted to 12 months HOA dues or 1% of the original loan amount. And then sometimes, the bank would pay all the past due assessments. This simply could be so they can sell the house faster because unless someone really loved a house and cannot due without it, they are not going to pay someone's severely past due assessments. This does cross into the legal arena because attorney's have been involved in these situations. This is Florida and it's a lien theory state.

CarolR11 (Colorado)
Posts: 2,563

Posted:

In CA, buyers, by laws. do not have to pay late fees, past dues, etc. from previous owners. So this all depends on the state laws in WA.

JE (Washington)
Posts: 2

Posted:

To answer some of the questions raised here:

MatthewW4(Arizona): Re your advice on paying under protest and suing later – it may be harder and costlier to collect against an HOA after you’ve paid them.

The total of the amounts past due plus interest is around $950. Hiring an attorney to challenge it would likely run more than that. It's the principle of the matter that’s important here. Why should one pay for someone else’s mistakes?

KevinK7: If you read the covenant phrase carefully, it indicates to me that the mortgage lien or deed of trust wipes out any junior liens including HOA assessments:
"assessments become a lien on the lot to which each membership is appurtenant, superior to all other liens, except liens of record prior to date of assessment, for general taxes and liens of any first mortgage or deed of trust."

DwightT: Colleague has indeed contacted the title company and filed a claim with tile company but is afraid claims department won’t respond in time to clear up prior to closing

DavidW5: HOA never recorded a lien against the original owner. It contends a lien is automatically created by the covenants so there wasn’t a need to record one

I can find no law in the WA statutes or in the CCRs that would allow an HOA to collect past owner's dues from current owner -- particularly if the home had gone through bank foreclosure, which theoretically would have wiped out all past dues. Question becomes how to contest if without hiring an attorney, since the total dollar amount isn't huge.

Any advice?

DwightT (Idaho)
Posts: 664

Posted:

Seems like the old rule of "Good, Fast, Cheap - pick two" may come into play here.

He can have it Good and Fast by hiring an attorney to send a letter to the HOA explaining the state of the world, but it won't be Cheap.

He can have it Fast and Cheap by just paying the lien himself to be done with it, but it won't be very Good.

Or he can have it Good and Cheap by waiting for the title company to resolve the issue for him, but that won't be Fast.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Here is an idea...Just sell the peoperty and let the chips fall where they may. It may be cleared up in closing. It should be recognized by the closing attorney what the issue is and if it is valid. That is their job to check for clear title. If it is not then need to id the steps to make it so.

Former HOA President

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Dwight

I say a letter to the association from a lawyer calling them out, explaining the law, etc. would be cheaper then paying the $950.00 to the association.

Whatever route your "friend" takes, advise him to keep all his dues and assessments up to date. This is critical.

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