Non-Paying residents - multiple years

If residents remain delinquent on HOA dues for longer than a year, how do we (subdivision board) update/change/modify the recorded lien at the County RoD office?

Do we simply record another lien for every additional year missed? Or, do we release the recorded lien and immediately record a new lien in the new amount?

Tom

If one is still behind in their dues after one year, there is a bigger issue than updating a lien. The chances are your association will never get paid. You are basically being ignored. It is time to pursue legal action such as a foreclosure or at least the threat of such form a law firm.

We had about 6 or really behind. We had placed liens on them all and gotten nowhere. We turned it over to a law firm and with the threat of foreclosure, we got 2 of them to pay and 2 of them to make payment arrangements. One is still negotiating payment arrangements. One has said bring it on.

You have to kick it up a notch.

Well, you can decide to do it on your own - but you may find it to be very risky. Hey, good luck and let us know how it goes for you - okay? We may all learn something...[smile]...

oljim, in texas

You don't necessarily have to change any of your documents. We just instituted a "Policy" and put it in our meeting notes that we placed a lien on 6 months behind and 1 year we CONSIDERED foreclosure. We let EVERYONE know the new policy. It's the best and fairest policy that I know of.

Keep in mind that any legal costs your HOA incurs in the process of lien/foreclosure is part of what your HOA collects. If it costs $500 to file a lien/foreclosure, then that is part of the money owed as part of the process. Plus there are other expenses like interest and late fees your HOA can add during this time period. Which most liens just continue on the house without needing to refile every year. You may want to double check that with your locality if you need to refile liens time period. Our continues till we are paid/settle.

We have discussed foreclosures on here numerous times. The basics are that around a 1 year is when the banks start sniffing around the property as well. You never ever want to foreclose on a property that the bank is foreclosing on. Plus the bank still gets paid FIRST and Foremost in a foreclosure. If your state has a "Super lien" option, then this is best as it puts the HOA on equal footing of the bank. Which means IF there is money there after the auction, then you will split it with the bank. Otherwise, any "profit" from a sale goes to pay the bank's debt first. Which 90% of the time there is no money there. It's just the fact your taking a stop the bleeding step in a foreclosure NOT a profit making one.

Foreclosures can't be done on members of the ACTIVE military. As long as they are ACTIVE/deployed the HOA can not proceed with foreclosing and/or liens. They can once the military member is no longer active duty.

Foreclosures are not that expensive. It cost os about $800. It takes time up to a year. Plus there are rights to redememption time period after the sale. The owner can buy the property back a year later if they pay the money the owe and any improvements done to the property while it was under the new owner.

The HOA does NOT want to own the property. The first bid does go to the HOA in the auction. The HOA can offer $1 more than the first auction price. Which is the amount owed. A foreclosure ALWAYS ends once the debt owed is paid. They pay they get to keep the home. Don't pay then it goes. They can fight all they want to and threaten to sue. Until you see the paperwork for a lawsuit, then keep on track. Keep in mind once you foreclose, they are no longer members and basis of their lawsuit can disappear...

There are many options and this has been covered many times. I recommend reading other posts. You may find some more ideas and suggestions. Good luck!

Larry, I'm new to this. Let me clarify a bit if I can: We are a new Board, barely three months into our year, so we are doing what we can to enforce HOA payment. We have enough money to pay our bills and operate throughout the year, but not enough money to hire lawyers at $800 per foreclosure (as suggested above). By the way...we have more than 3 non-payers. But only the three mentioned above are late over multiple years.

Regarding increasing our assessments....it has been tried multiple times over the years and it always gets voted down. According to our CCR's, we need 2/3 vote to increase our assessment. If the residents won't vote it through, I'm not sure what we can do other than have yet another vote on it.

Your recorder’s office should be able to answers those questions – in my state, the liens are good for 5 years and then they can be renewed.

Besides your deadbeat owners, your other problems (the bigger ones really) are (1) an apparently lack of a collection policy and (2) the other homeowners who keep voting down assessment increases. No one likes fee increases, but I think HOA boards should be able to raise assessments up to a certain percentage without a homeowner vote (in my community, the board can increase assessments up to 5% over the current year, otherwise homeowners have to approve).

Until you resolve both of these issues, you and your fellow homeowners are in for a world of hurt when something major happens and you don’t have the money to take care of it (God forbid a fire, tornado or other mayhem comes along and there isn’t any insurance or enough of it to cover damages – because the homeowners refused to ante up!) There are discussions all over this website about collections and how various associations address it, so I’d start with a search to get some ideas to bring to your board.

I’d also call for a special homeowners meeting (aka come to Jesus meeting) where people need to hear the hard truth – it’ll hurt, but may set them free! Make copies of your budget and most recent income/expense statements with figures showing how many homeowners are delinquent, how long they’ve been delinquent and how much is owed. You don’t have to name names – saying X homeowners have been delinquent for X number of years and owe a total of $ as of this date should be enough.

If anyone asks who they are, tell them the Fair Debt Collection Act, a federal law prohibits disclosing one’s debts to unauthorized people. Yes, I know you’re all business partners in a sense because you own the common areas together, but unless someone’s willing to pay off the debt and then you can disclose the name, you need to keep things businesslike and professional to avoid heavy fines for disclosing private information.

In the meantime, real numbers should demonstrate to everyone how these deadbeats are risking the quality of life and ultimately property values for all. The property still has to be cared for and when some don’t pay, everyone else has to pay more to make up the difference. If you don’t get enough money, the board has to make tough decisions as to what gets paid.

Now that everyone’s paying attention, announce the board’s new collection policy, effective immediately. Give a copy to everyone and tell them those who currently owe will have liens filed against their homes and they will be referred to an attorney the board will hire to collect the debt. As part of the new collection policy, delinquent homeowners will be required to reimburse the association for all collection costs and attorney’s fees incurred in pursuing the debt, which can and will include foreclosure. If delinquent homeowners would like to make arrangements to pay off the debt, notify the property manager or whoever you designate. Since money is already an issue, tell the homeowners until this gets fixed, non-essential work will be delayed, starting right now.

Looking towards the future, ask the homeowners to consider amending the governing documents so that the board can increase assessments up to a certain percentage every year – anything higher can require the 2/3rds homeowner vote. If they don’t want to fund the association properly, the alternative is to special assess everyone whenever a major expense comes up – they’d have to vote for that too and won’t like it either, but if you need a new roof, you’ll have no choice. That’s why it’s usually better to pay a little more now to allow for inflation and emergencies so you don’t get a nasty surprise.

Hey, I bet you guys don’t have a reserve study either – if you do, that’s more ammunition for your request to amend the documents. If not, get one – and yes, that’ll probably back up non-essential tasks for a few more months.

Don’t want to give the board the authority? Ok, amend the documents to move responsibility for certain items to the homeowners and they can figure out for themselves how to pay for repairs and replacement. Then, they can keep fees “low.” You may want to pass out a few invoices for recent work so they can see how much things really cost – that work may have covered everyone, but what happens if they have to pay for the work all by their lonesome?

I appreciate everyones replies. It's a small subdivision with a handful of deadbeats.

As Shiela and John mentioned...yes, we can recoup interest, expenses and lawyer costs.

There is nothing in our Restrictions or Bylaws that allows us to increase the assessments without a 2/3 vote.

Letters sent from a lawyer would seem to be our next logical step.

Text from our Restrictions:

Rate of Assessment. Both the general and the special assessments shall be set by the Board of Directors at a uniform rate for the Owners of all lots and may be collected on a monthly or annual basis. The maximum annual assessment per lot shall be Seventy Five ($75.00) Dollars. The maximum annual assessment may be increased by a vote of 2/3 of the members, excluding the Declarant, who are voting in person or by proxy, at a meeting duly called for this vote and the affirmative vote of the Declarant.