Condos Controlled by the Bank

About three years ago, the bank took over three condos belonging to Mr. A, Mr. B, and Mr. C. The bank, being very clever, kept the condos in the names of Mr. A, Mr. B, and Mr. C but changed the locks and took over the condos but DID NOT put them on the market for sale and do NOT know why. Three years have now passed and they(the three condos) are still NOT on the market but in the meantime the HOA continues to provide landscape maintenance, security, etc. for the three condos knowing that the dues for them will NEVER be paid. We do NOT know how long the bank will keep them off the market and deprive the HOA from collecting the HOA dues which have now accumulated to over $25,000. What are some legal-type questions can we START asking the lawyers to get with the bank to find out what is going on...We cannot take out a lien because the mortgage would be more than the lien itself .. I want to formulate some good hard hitting questions that I can get with the lawyer about to try to bring this to a head... any good ideas for questions, i.e. Mr. banker: How much longer do you plan on holding the properties off the market?

Banks are mighty tough groups to deal with...soo sorry you are being put in this situation.

Bottom line, sounds to me like the bank has no legal standing at this time....especially since the condo's are still in the name of the owners.

I'd think that your Association would be authorized to deal with these homes in the same way as other abandoned homes are dealt with. IMHO, the bank does have the lien on the property but does not likely have the right to control the property. What does your governing documents say about abandoned properties? What do u think?

oljim, in texas

There are several threads on this topic on the website - you may wish to search for them to see how other folks addressed the issue. I know I've brought it up at least twice and unfortunately, there's not much you can do other than file a lien. The lien isn't to foreclose (as you already know, that would be a waste of time and money), but to ensure the bank would have to pay the HOA something before the condos change hands.

When I was board treasurer, we discussed this at length with our attorneys. One thing we considered was to pursue quiet title against the bank, arguing that since they hadn't done anything with the property, they've essentially abandoned it and meanwhile the HOA was losing money trying to maintain the exterior of the property. Taking this type of legal action is expensive and there's no guarantee the HOA would win - I don't know how the law works in your area, but you might discuss this option with your attorney. In fact, if the same bank has the mortgage for all three condos, that may help your case if you can show the judge the financial impact of the bank's inaction on the HOA and the homeowners who have to pay more and receive fewer services because they have to indirectly subsidize these guys.

There doesn't appear to be any laws anywhere to compel the banks to move on these homes - most won't do it because it would cost them money (and we know banks LOVE money), especially since the HOA fees are considered a personal debt of the homeowner. It's really annoying, because our attorney told me that buried somewhere in all those papers signed at closing is language stating something to the effect that if there are HOA dues, the homeowner is required to keep them current because not doing so puts the property at risk for foreclosure, which would affect the bank's interests. In light of that, you would think the bank would at least pay the fees so they wouldn't have to worry about the HOA liens, but instead they get their cake and eat it too.

Finally, you could try to go after the homeowner, but good luck in finding them and getting anything. If they declared bankruptcy and listed the debt and that debt was discharged, you're SOL on that portion of the money anyway.

You should have had your HOA foreclose on these condos 6 months after nonpayment of dues. Your HOA could have been collecting rents on 3 units for the past 2.5 years.

If it were my HOA, I'd start foreclosing immediately.

PS. Lien is useless if the bank hasnt taken ownership yet. When the bank forecloses, it wipes the lien.

We do it all the time. You need a fool proof game plan before you attempt. We will wipe out all our past delinquencies with just four rentals.

We foreclose on the homeowner, evict them, rent the home, reduce our delinquencies, BEFORE the bank forecloses on the HOA.

Up to a year and up to $3000 to foreclose and evict, but we can make $30K per year, per unit.

This method is highly not recommended to do. I have done a HOA foreclosure. The first rule is for the HOA NOT own that foreclosed house.

Now, am I saying this method does not work? No. I am not. What I am saying is that renting out property one does not own during a foreclosure process is EXTREMELY risky proposition in the long run. The consequences if caught are astronomical. The HOA could be on the hook for ALL the rent it collected during this time period. They risk a lawsuit from the bank and/or new owner. An overall expensive proposition.

There are many factors involved here. None of which, that renters do NOT pay HOA dues. So how does an HOA evict a tenant not paying? Are you all as owners feel you can handle being a landlord? That involves making repairs to the property and paying for them out of your dues. By renting the property makes you ALL landlords, and as anyone who has rented out property knows the complications involved in that. Now you have that ALL across the board for all the members. Does that sound like a really good idea?

If you are considering this option, I STRONGLY suggest talking to an attorney first. That includes even writing a proper rental agreement. You want to talk to a financial/tax expert on the ramifications of taxes. You want to see if you have the money in the budget to handle repairs, house payments, dues payments, house expenses, house insurance, utilities, and all the expenses of owning a home that technically you do NOT own.

I'd suggest patience, talking to the bank, and filing liens....

This approach is not for the weak at heart or ones that have someone else manage their HOA. We have delinquencies in the neighborhood of $170K, which includes non-payment of water. I could sit by and do nothing or try and do something. We have liens on all the properties, but if the bank forecloses, we get nothing, if they file BK7, we get nothing. We/I am trying to do something. We have laid out a game plan and follow to the letter. We use a property manager, specializing in the rental of homes. Their fee will be incorporated into the lease price. The HOA fee will also be incorporated into the lease price. There is no house payments. Property Manager handles the eviction process. Banks right now are not doing anything, they have way too much inventory.

Melissa, we aren't asking for your opinion. As the saying goes, you can lead, follow or get the hell out of my way!

No resort. We make it work.

It's called getting your money back. I don't particularly like renters, but this time I will use them to benefit us, short term.

To be clear Melissa, I am not in the rental business, I am in the "getting my damn money back business". In this case, slapping a lien and enforcing it in this instance ain't going to work.

Flotation devices get in the way of objective thinking.

You are more clueless than I thought.

As I said, I am not a fan of rental, just attempting to get our money back. At this stage of the game, the lien that is on the property is worthless. We are looking to rent out until the bank gets wise and forecloses on us, which is what we ultimately want, a paying homeowner. We are looking at a window of 6-12 months tops.

Alex

I am not saying right or wrong but many associations have done as Richard said and I have never heard of any bank coming back on them.

Some of those type rentals have gone on for years.

Wise advice.

Along the lines of this conversation, does anyone have specific examples of the take it over and rent it going wrong?

If you both bought your homes for $100K, you paid cash and they financed 100% and the houses are now worth $200K, if both were delinquent on HOA dues, I would foreclose on you're, not his.

Make sense?

Keep MelissaP1's advice in perspective. Her HOA did try this and got some very bad advice along they way and made a mess of things. So she had a bad experience because of this. Most HOA's do not have this same experience.

My foreclosure was not a mess. We did not buy it. It took another year when HUD foreclosed and then it got a buyer. We never touched the property except for a water leak. The house is now fixed up and in good shape. Just took time and patience. We did not waste our money pursuing what we thought we deserved. We only deserved our dues. which were $50 a month. Why put our HOA at risk for that amount of money?

The assumption was also that house #2 besides not paying their dues was also delinquent on their mortgage.

You have a lot to learn about HOA foreclosing on homeowners. Obviously, you aren't leaning anything here.

Melissa
You seem to be struggling with the idea that a non-profit can make a profit. It can.
What a non-profit cannot do is distribute those profits to its members.

No YOU do NOT hire the lawyer... the HOA does... Meaning ALL the members are using their dues money to pay for this... I would NOT be a happy member if I found out my HOa was renting property month to month without ownership of the property... Plus revealing or not that on the HUD form the # of rentals. Which determines the type of loans avalaible, rates, and refinancing rates...

I prefer going after the people who really owe the money...

In all 50 states, a title obtained through a foreclosure lawsuit "is ownership". The HOA owns it, they can do with it as they please. The mortgage is a separate legal document and has nothing to do with titles.

Steve9... The HOA does NOT own the property. The bank does. That is what he stated. The HOA foreclosed but the bank owns. It is the BANK that OWES the money to the HOA. It is NOT the renter other than rental payments. Richard is NOT making "money back". He's making a straight profit off the renters. If he was making money back it would come from the people who OWE the money. That is either by former owner's who were foreclosed on or the bank the current owner. To say getting money back from people who never owed a debt or is even a member at any time, is a misleading. It's pure 100% profit not money recovering...