Who is owner on an owner financed loan?

Started by MelissaP1 • 7 replies • 1625 views

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MelissaP1 (Alabama)
Posts: 13,836

Posted:

I just got contacted about a legal issue. A few years ago we had a situation where the owner was behind in dues severly. (2 years plus didn't pay a special assessment). We took steps to collect. In that process, it was "rumored" that the property in question was part of a "Rent to Own" situation. The renter had a contract with the owner to purchase the home. The rumor included the fact that the owner had been charging EXTRA to the tenant to satisfy this contract. The renter lived on the property for over a year I believe. The property was foreclosed on by the HOA.
What has happened is there is a dispute on who was responsible for paying the dues. Our records show the Owner's name is "Jack". However, "Tim" is the unkown renter. "Jack" insists that "Tim" is responsible for paying the dues. Renter's are NOT responsible for paying the dues. It's always falls back on the owner on the deed. However, since there was an "owner financed" loan on the property, who is the legal owner? (They both put the ownership on eachother.)
This situation is going to court so can't give out any details. I am very confused. My proof has it that the owner is clearly "Jack" but I don't know the rules on owner financed loans. Please help if anyone is familiar with Rent-to-Own contracts.
Ps. I am on "Tim's side".

Former HOA President

Jadedone4 (Virginia)
Posts: 495

Posted:

I would tend to agree with you Melissa - however that comes with the caveat that there would be need to review BOTH the loan T/C's (from mortgage/bank), and the T/C's of the "rent to own" agreement. While the "RTO" would not excuse the owner from his/her responsibilities to the mortgage/bank, it would add some reference to the situation. I strongly suspect that original owner is responsible for the mortgage, the HOA assessments, and everything else - unless the "RTO" person co-signed on the ORIGINAL doc's. I do not believe that you can "transfer" responsibility, unless you have the expressed permission of the original party (mortgage/bank and the HOA, in this case).

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Thanks! I am thinking that the owner thinks they set the terms of their loan so that the "RTO" paid the dues. That's their attempt at "defense".
The owner's say they didn't pay their dues because they felt the lawncare caused damage to their home. How can they claim "Protest" on paying dues but then say the "RTO" is responsible? Think someone has issues?

Former HOA President

BradP (Kansas)
Posts: 2,640

Posted:

The owner is the person who is listed with the local register of deeds. IF they tried some crazy rent to own situation that isn't your fault, whoever is listed is responsible. Who is responsible for the taxes?

Jadedone4 (Virginia)
Posts: 495

Posted:

All of the relationships are one-way. Owner to lender = one way; Owner to HOA = one way; Owner to "RTO" = one way. None of the relationships are two/three way, and therefore since no party from one was privy to the relationship's T/C's, they cannot be bound. While their maybe "reactionary" relationships which are the result of the one-ways, they are not bound by them. Owner does not pay lender; lender forecloses, evicts "RTO" - "RTO's" issue and recourse is with owner NOT lender. Owner does not pay HOA; HOA applies/files lien against property, lender is NOT responsible (but in event of esculation, would recieve their money first, then outstanding judgements..), only the owner. Owner does not pay HOA - "RTO" is barred from common elements, "RTO's" issue is with Owner, not HOA; "RTO" fails to pay owner, owner still responsible to lender and HOA for any and all agreements owner entered, not the "RTO."

There are RARE instances where you can "withold" dues/assessments (and I am sure that some here will say NEVER, but as I am new and still green, I haven't, and hope not to have travled those dark and creepy roads). I would say that lawncare would not rise to that threshold of witholding, and is just a tactic by the owner. Although the "jaded" side of me is thinking that if the HOA put down some Jack and the Beanstalk grass seeds, and prevented me from accessing my checkbook with the overgrowth, that might work......

JM2 (Oregon)
Posts: 439

Posted:

Hi Melissa:

If the HOA is taking the matter to court, they should, or should have, contacted a title company to get a "warranty deed," which shows who in the county records is the legal owners of the property. That would be the person who should be paying the dues.

It's normal in a RTO situation that the owner charges the renter an above-market rate for the rental, and part (or maybe all) of the rental fees go toward the proposed purchase, which the renter loses out on if the renter chooses not to excercise the option to purchase. Normally, the rental situation goes on until the renter either chooses to purchase, or moves out (if you're not buying, why pay the above-market rent?).

If they had specific language in the contract regarding paying of the dues, then the contract might over-rule the ownership issue (not totally sure) but I would think that an owner would have to be terribly naive to assign the payment of the assessments to the renter and really expect them to be paid...

J. Patrick Moore, CMCA

Jadedone4 (Virginia)
Posts: 495

Posted:

Patrick, your post was valid until you got to the last paragraph...

"If they had specific language in the contract regarding paying of the dues, then the contract might over-rule the ownership issue (not totally sure) but I would think that an owner would have to be terribly naive to assign the payment of the assessments to the renter and really expect them to be paid..."

It does not matter what language or agreement (contractual, etc) that the Owner entered into with the "RTO" that is segregated to those two parties and does not have any bearing to Lender/Bank, or the HOA. The ONLY way this could be attained is that the Owner/"RTO" were on the deed to the house, and notice was filed to the Lender/Bank, County/Taxing Authority/Clerk of Court/Recorder, etc - and the HOA. At that point, the referenced parties listed, would then ask for valid proof from Owner/"RTO" of this agreement (basically affirming that both have agreed to be equally liable for whatever).

MelissaP1 (Alabama)
Posts: 13,836

Posted:

I do have a piece of paper verifying the owner of the home as "Jack". This is an OWNER Financed loan NOT a bank. Which confuses me. I do remember when we foreclosed that the owner had somehow taken out a new loan recently on the home. I had found it odd at the time considering the house had been owned for several years and purchased originally around (I assume) $65K. The original loan should have been in the $50K area by the time of foreclosure. However, there was a second mortgage? of around $72K. At the time this was about the value of the NEW sale prices in the area.
I am thinking that the original owner must have paid for the property completely years ago. However, when they made the "Rent to Own" contract, they had furnished the money by getting the second mortgage/loan. It was that loan the tenant was paying off. Maybe making that a "Owner financed loan". That would make sense.
I believe the "RTO" person has a case against the owner regardless. It has to be the owner on record on the deed who pays the dues. If the home was paid for completely, the owner's name would appear on it until they transferred the deed to the "RTO". I wouldn't transfer a deed to someone until they paid up completely. If they had given the deed over to the renter, what proof would they have that the renter owed them money?
Thanks for the Help! It really helped me put things in perspective. I couldn't seem to put the issues in a line. I have to appear in court on this issue ASAP and wanted to understand the situation completely. The HOA did act accordingly and to the rules of foreclosure. Hence why the situation is now between the 2 owners.

Former HOA President

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