Tax Lien Certificates Purchased

Started by BobF9 • 12 replies • 925 views

💬 Join us to post & get advice from 50,000 HOA & Condo leaders.

⚡ Takes 30 seconds

Already a member? Log in

BobF9 (Florida)
Posts: 6

Posted:

I don't know why the Font is so big when I type this.

From all that I've read tax lien certificates are an investment. There is an HOA in Florida where the president of this HOA took it upon himself to purchase the tax lien certificates on a property that he plans on putting a lien on and foreclosing on due to overdue HOA fees.

I believe this was done so that the tax liens didn't override those plans. So by owning the tax liens this HOA president thinks he can continue on with his plans.

My concern is an HOA is non-profit organization. I have never heard of an HOA purchasing tax lien certificates before.

This was also done without the homeowners in the community even knowing it was done.

Just wanted to get your take on this

BobF9 (Florida)
Posts: 6

Posted:

The expenses were not even reported. It seems a strange conflict of interest for tax lien certificates to be purchased by an HOA.

BobF9 (Florida)
Posts: 6

Posted:

I guess no one really knows if this is unusual or not

KerryL1 (California)
Posts: 14,550

Posted:

Can't speak for others, but I don't know what a "tax lien certificate" IS.

LetA (Nevada)
Posts: 2,679

Posted:

It sounds like that HOA prez is purchasing those on his own, he plans on buying them as an investment. I believe Florida is one of those
states where any mortgage on a foreclosed property gets wiped away in an HOA foreclosure. It sounds shady, unfortunately it is legal.

DouglasK1 (Florida)
Posts: 2,046

Posted:

Quote:

Posted By BobF9 on 02/10/2018 3:01 PM

My concern is an HOA is non-profit organization. I have never heard of an HOA purchasing tax lien certificates before.

I agree that it seems unusual that an HOA would purchase a tax certificate, but I have no idea what the ramifications are.

While HOAs are generally not for profit corporations, they do have income, both from dues and potentially from other sources including investments. Note that income does not equal profit.

Escaped former treasurer and director of a self managed association.

RichardP13 (California)
Posts: 3,868

Posted:

A tax lien certificate is a certificate of claim against a property that has a lien placed upon it as a result of unpaid property taxes. Tax lien certificates are generally sold to investors through an auction process.

BobF9 (Florida)
Posts: 6

Posted:

They were not purchased in the individuals name. They were purchased in the HOA's name with HOA money

BobF9 (Florida)
Posts: 6

Posted:

They were not purchased in the individuals name. They were purchased in the HOA's name with HOA money without the community's knowledge. One resident found out by accident. It was not reported either on the expenses.

GenoS (Florida)
Posts: 4,276

Posted:

Tax liens in FL are a lucrative form of investment that can generate annual returns as much as 18%. When you buy one at an auction you pay the overdue taxes and in return get the right to collect that amount plus interest when the owner settles up. It's such easy money that big companies were able to game the system by setting up shell companies - numbering in the thousands in some cases - to flood the auction bid process and improve their chances of winning the auction.

So, the question becomes if the president was authorized to "invest" the association's money in these tax lien certificates. While they're extremely low risk (no risk, really, if the HOA is planning to lien the property and force a settling-up), does the president get to decide how to invest the HOA's money? Who sets the HOA's investment guidelines and procedures?

It might even be a good idea, but it sounds shady if the president made the decision on his own.

BobF9 (Florida)
Posts: 6

Posted:

Done without permission. In secret. Money not reported on expenses. Spent thousands. HOA does not invest. Is a nonprofit.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Keep in mind that Associations are Not FOR Profit (not nonprofit).

They can invest and some do.
They can make a profit.
All proceeds must be used for the purpose intended (they may not give the profit earned back to the members).
All proceeds not from Assessments are taxable.

If they earn too much from investments, there could be additional consequences (such as filing form 1120 vs 1120-H)

GenoS (Florida)
Posts: 4,276

Posted:

Not-for-profit corporations in FL should not show any profit or loss in a given year, but they can invest money that's just sitting there, such as a reserve fund. Investing in CDs and/or Treasuries is common. You might want to consider submitting a written request to inspect the association's financial records and reports for the past few months.

🎯 You've read this entire discussion

Join the conversation with 50,000 HOA & Condo Leaders:

✓ Ask follow-up questions
✓ Share your experience
✓ Get expert advice
✓ Access 350,000 discussions

Create Free Account →

⚡ Takes 30 seconds

Already a member? Log in here