Bank foreclosrue with HOA as a named defendant

Geno,

You are in legal territory where the best advice is to seek the advice of a local attorney.

If you don't like your current attorney, ask those questions of a new attorney.

I did find the following on the internet:

My HOA has been named as a defendant in a lender foreclosure in our community. What should be our written response? from AVVO (question is from FL and answered by attorneys)

Association’s Participation in Bank Foreclosures from an attorneys website. The following is a quote from that site [emphasis added]:

"Associations are named as defendants in mortgage foreclosures for the purpose of availing the bank of the ‘safe harbor’ as to a limit of liability as to outstanding monetary obligations to the Association and to eliminate any rights of first refusal in favor of the Association or individual unit owners. As with any lawsuit, a response must be timely filed, or the Association may be precluded from further participating in the case."

3 Gray Areas In Florida's Condo, HOA Safe Harbor Statutes from an attorneys website From that article:

"To qualify for safe harbor, a first mortgagee must join the association[8] or initially join the association[9] as a defendant in the mortgage foreclosure action."

Foreclosure Cases Leave Associations In Limbo 2014 article from a legal blog. In this article:

"Associations are named as defendants in mortgage foreclosure cases because of their power to levy assessments on the titleholder. As defendants, associations have limited tools to move mortgage foreclosure cases towards a conclusion, the chief ones being: (i) the Case Management Conference, (ii) the Pretrial Conference and (iii) the Order to Show Case."

Again, my advice is to pay an attorney and obtain your legal options.

Thank you all for the thoughtful replies. It's clearer now why an association is named as a defendant in the foreclosure action.

There's a twist that I didn't mention in the original post. The foreclosure is on a home in another county that's not in our subdivision. We were named as a defendant in a case of mistaken identity.

The subject home is in a platted subdivision in another county with the same name as ours. The developer there improved the lots, paved the roads and sold the parcels. He formed a corporation not-for-profit and called it "ACME, INC." It was dissolved 27 years ago and it never filed any deed restrictions or covenants for the subdivision. In other words, there is not and never was an operative HOA there.

The bank's attorney probably looked at the FL SoS website and found "ACME HOMEOWNERS ASSOCIATION, INC.", which is us. We're an active FL corporation; the defunct "ACME, INC." is not. They mistakenly named us as a defendant and that's a mistake we should not have to pay for.

I have read enough to think that if we don't answer and claim "mistaken identity" we could lose the ability to use that defense in the future. I can imagine someone from the bank with a court order and a sheriff at their side showing up at our bank looking to execute a judgment against us. At that point, nobody's going to listen to the old, "Yyou've got the wrong guy, I swear!" defense.

Geno you are still being sued so let your attorney answer the complaint and say they are suing the wrong entity. Ask if he can request attorney fees in his answer.

Allison and Larry, that's my take on it as well. Now I just have to convince others on the board.

We learned about this through our attorneys after they received service as our registered agent. They basically said, "What do you want to do? Ignoring it will incur no billable hours from us. If you want to do something we will bill you $200 to discuss your options." I seriously wonder what we pay them for. I think one option for us could be hiring another attorney to handle this, one that wouldn't charge $200 an hour, because in the end I don't think this is an HOA case at all, it's more of a basic civil procedure case.

Florida does have a statute for recovering legal fees by requesting sanctions against a lawyer (and his client) for raising unsupported claims. Unfortunately, they are exempted if they acted "in good faith". They'll claim - perhaps truthfully - that it was an honest mistake and then we're out even more money for the additional time our attorney spends pressing this claim.

I hope this can be made to go away for a couple of hundred dollars max. Mistakes do happen and sometimes they incur costs through no fault of your own; a normal and necessary expense, as Larry says. I agree. Now to get the board to also agree. The next board meeting is 10 days away and probably not another one after that until February.

For what it's worth, the home being foreclosed on is a 30-year-old double-wide on 0.3 acres with an estimated market value of $35,000. The foreclosure lien bottom line with remaining principal, costs, fees, and interest is $72,000. If it only brings $35k at auction I don't want to gamble that we may be held responsible for the difference. I fully agree with Larry that not dealing with this properly could be a breach of fiduciary duty.

I don't see how we can hold board member candidates to higher standards that we do US presidential candidates.


Really, $200 is a steal. If you find a good attorney that charges less than that, let us all know.

While not an HOA situation, I once got confused with another person of the same first, middle, and last name as mine. I had to have my lawyer respond with some type of "legaleze". It cost me about $100.00 by the time all was said and done. The cost was not worth going after.

It is complicated. The Rules of Civil Procedure is complicated. The law is complicated. This is why it takes years to get a law degree and years more to obtain a license to practice law. This is also complicated by the fact that the board of directors are acting in a fiduciary capacity for the benefit of the members, any one of whom could sue any of the directors for breach of their duties. This is not a situation where bungling amateurs are likely to succeed.



The plaintiff's lawyer is under no obligation to take your call. Even if he does talk to you and agrees to amend his lawsuit, you will have no record of this conversation. The matter is before the court and the clock is ticking. If the other attorney fails to inform the court of his mistake and the time to respond runs out, you would be screwed.



See above advice. The clock is ticking and it is the court, not the attorney, to whom you need to respond. If I was that attorney I would promise you the moon while doing nothing because I want to be able to take a default judgment against you due to your failure to answer my lawsuit within the time allowed.



As stated above, a written response needs to be filed with the court within in time allowed. In my state, only an attorney may represent a corporation in the superior court (where foreclosures are heard). Without an attorney and without filing a written response, the judge will never know that the plaintiff's attorney has gone after the wrong party. You have one bite at the apple and if you do not take it when you can then you have no second chance.

Most of you nailed it – consult an attorney (I say this every time someone asks for legal advice on this board) and DO NOT ignore any legal document where the HOA has been named as a defendant (I don’t know why the rest of this board seem to think this stuff magically disappears if they simply ignore it!)

(On a related note, please provide as much information as you can from the beginning on your questions. I realize the situation may be fluid as you post a new topic and you might not have everything at the time, but if you’d mentioned the factoid that this foreclosure is in another community in another county from the start, we would have saved some time. This is another issue on this board - too often people leave out stuff that can easily turn the problem on its head.)

Anyway, if someone mixed up this HOA with another one (in another county on top of that!), perhaps this can go away with sending a letter to the law firms involved. I would hope your property manager can do that, with a copy to your attorney (add a line stating any future contact regarding this issue will be referred to him/her for a reply). If this fixes the problem (and save the association $200!), be sure to get WRITTEN confirmation of the same.

You may be right that your attorney is looking to generate huge fees for little effort. I don’t know why he/she couldn’t simply send a letter and then suggest a meeting with the board if that doesn’t fix the matter. A paralegal in the firm would probably write the thing anyway – and I know they don’t make $200 an hour.

Our association attorney put a certain number of hours in his letter of engagement to be used for responding to emails or phone calls requiring minor work and we’d pay little or no cost. To keep people from going to the attorney with every little issue, we had a designated board member or property manager (upon prior authorization from the board) make the contact. When I was on the board, I was that contact and always copied my colleagues on the emails to keep everyone in the loop. By designating one contact, you can better control costs.

You may want to negotiate something similar with your association attorney – if he/she can’t or won’t consider this, look for another one. In the meantime, there are a number of articles on the internet on how to work with your attorney in a cost effective manner – Google a few and see if you can pick up some tips that you might incorporate as board procedures.

What did your attorney do to take care of it? How much did it cost?

Good that it's all settled - once you find out what happened, be sure to have a discussion about keeping ALL board members in the loop. Something this important should have been discussed in a board meeting first, so the president would have been properly authorized to take care of this.

Eek. I really hate it when people thing president (or even chairman of the board) is another word for "dictator." Even worse, you say you have board members who will simply nod and go along with whatever because it sounds good (in fact they really don't want the responsibility if the decision goes south, making one wonder why the hell they're even there).

Read through a complete stack of papers? Good Lord, that takes too long - the president said she read it and is going to do X so that sounds good to me (oh, wait, we only found out about all this three months after it was a done deal...)

Time for the board to consider a code of conduct/ethics or whatever you want to call it. Bottom line: no one's a lone ranger and doesn't have the right to do anything in the association's name without a formal vote in a OPEN meeting. Board members are free to vote no, but they do not undermine a board decision - if you object, prepare a statement that can be attached to the minutes and then do your part to ensure the decision works (if it doesn't, you've proven your point). If mistakes are made, admit them, fix them and learn from it - fairly common sense things that people simply cannot seem to figure out.....

Geno and Kerry and Shelia,

I think this president understands her role far better than the board members understand theirs. Officers are there to manage the day-to-day affairs of the association. The board's job is to raise funds and budget expenses plus appoint officers and determine what policies are needed. In the real world, BOD's meet just once a year; the officers run the show. The only fault I find with this president is that she should have kept the board better informed about the lawsuit. If I was grading her performance I would give her a "B." The powers that she has exercised are typical of any CEO.

The BOD, on the other hand, seems to have failed miserably. I cannot even begin to fathom how incompetent a person must be to think that taking no action at all in the face of a lawsuit is appropriate. The board seems to have little understanding of what a president is supposed to do and has taken no action to narrow the scope of the CEO's authority.

BTW, the term "Chairman of the Board" seems to have little legal meaning. When the board meets and the president presides over the meeting, Chairman of the Board is an appropriate title but most associations seem to stick with the "President" title. None of the annual report forms we fill out Arizona mention "Chairman of the Board" and I do not recall ever encountering that term in my reading of the statutes.

A code of ethics is an excellent idea and I've found several examples that would make good templates for developing one. The president, though, drafted one of her own and demanded every director on the board sign it. It reads more like a loyalty oath than a code of ethics. She told the board at her first meeting that anyone who refused to sign it would be "removed from the board". Talk about a power grab, there is nothing in the law or our governing documents that gives the president the authority to kick a director off the board for refusing to submit to a president's diktat. One director resigned rather than sign it, unfortunately, believing that the threat was credible.

Your take on that board member isn't far from the truth and we are probably better off without him. I think the president's ultimatum was done out of ignorance and a desire for control rather than a calculated Machiavellian maneuver. She thinks the ballots in January will list her name alongside "running for president".