Florida - Non payment of assessments, Foreclosure and Chapter 13 Bankruptcy

Hi All,

Got cornered into pres job for 314 property single family POA in Florida ... trying to herd cats and pick up pieces.

Have a CAM and the usual lien process for non-payment of assessments - CAM is not particularly helpful - they do their basic job, but that is about it.

Currently, have an owner who has not paid last two cycles of assessments, we have been assessing late fees and interest, bank is foreclosing and owner has filed Chapter 13 ("wage earner bankruptcy"). Supposedly, Chapter 13 stops foreclosures until some process can be worked out to allow payment plan for the Chapter 13 filer.

Anyone been involved from the their HOA/POA in this circumstance?

I've got a meeting with the POA attorney on Monday, but would like to get some perspective ...

Thanks.

If the foreclosure process is currently stalled, you could ask the bank to pay them under the remedies section of the PUD rider, https://www.fanniemae.com/content/legal_form/3150.pdf

Not many people in the country know how to do this, as it involves tracking the MIN through MERS.

If the bank proceeds with foreclosure and the H/W file Chapter 13, well then. the association is pretty much SOL.

There's also the added complication that, in Florida, the purchaser of a property at a foreclosure sale will be responsible for any HOA dues that had accrued prior to the foreclosure. This general rule is dependent on the association's governing documents and when they were recorded. This is because the relevant legislation was passed in 2007 and recorded declarations prior to that date are immune from its effects.

Also, first mortgagees get a partial pass from this rule. I'm not sure at all how a Chapter 13 BK would play into all that.

You can't do any of this after they file for chapter 13. You can't attempt to collect on a pre-petition debt, you can't even send them a letter about the debt. It all has to go through the court by filing proof of claim. You'll get pennies for each dollar they owe through the repayment plan.

Now if it was post-petition HOA dues, that works like a regular debt.

Hate to say it but your HOA is SOL if the bank foreclosing and bankruptcy filed. All hope is not lost though. You can still file a lien but know may not get any of the filing fees or dues owed collected. It may just put you in line of the other creditors. Some states they have "Super Liens" that would put you on equal footing of the bank. However, 99% of the time the bank is always going to get paid first and foremost.

A foreclosure is nothing more than a "Stop the bleeding" effort. Your just trying to fill in a hole that is created by them owing money. It is by far NOT a profit making venture as many would like to cry about.

The hopeful part... Not sure what Florida's laws are for right for redemption. Some states it's zero to a year. That is the period of time the owner can pay back what they owe to get their property back. No one can basically touch the property till that period is over. It's a bit risky putting in money into a property just to have it taken out from under you.

Well a bank foreclosure may allow the home to be sold a bit faster and leave it empty for less time. Filing bankruptcy they could be making efforts to stay. Which means hopefully less likely to have an abandon property sitting around collecting dust.

When I joined our board, there was one resident who was ALWAYS late and she'd be on the verge of a lawsuit being filed when she'd suddenly pay up and usually start up again after a year. By the time I became treasurer, she'd resorted to using bankruptcy as a way to put off paying. That's when I got really pissed and the next time she fell behind, I pushed for putting a lien on her home.

At least twice, this lady's M.O.: fall behind, gets sent to our attorney for collections, we'd file a lien, then a sheriff's sale would be and - on the day before, she'd file chapter 13, thus stopping everything. Then she'd go to court, but eventually her case would get tossed and we'd have to start over.

Once, I took off from work one afternoon to attend the hearing, as our attorney was going to have me speak about this woman's BS behavior - and then the judge said she hadn't done what she promised and he was tossing the case. Again. Her attorney later told us he was done with her as well (guss she didn't pay him either - one of those TV bankruptcy attorneys, as I recall (no, not THAT one!)

The last time she did this was shortly after I left the board. The hearing was on one of those near-polar vortex days (that one wasn't as bad as the one we had in January this year). The hearing was held by telephone and the woman went on an on about her son being on disability and whatnot, and for some reason, the judge gave her yet another chance (WTF???) Our president later told me the judge threatened to prevent her from filing chapter 13 again if she didn't pay up. She did pay a little, then she stopped (again) and a few months later, the president told me the judge had tossed the case (again).

That may be an extreme example of how kooky these cases can get, and I neglected to mention before that if you can, go to the bankruptcy hearing and talk to the judge about whatever steps the association took to try and collect. Maybe the judge will be inclined to tell the owner to take the payment plan seriously or the case will be tossed and he/she will lose the home in chapter 7. If you're really lucky, attorneys from the bank will also be there and you can give THEM a piece of your mind about failing to pay assessments on the homeowner's behalf when there's language in the mortgage agreement addressing this. That's one thing I never got to do dealing with the jackass in my community, but maybe the bank soon saw the light. The woman is still an owner, but I haven't heard anything about delinquencies, so I hope the mortgage company stepped in and increased her payments so it'll be covered.

This is why I'd love to see superliens as Cathy mentioned

Most 13s get converted to 11s (only those with highest priority get paid).


If she failed to list it, the bankruptcy court wouldn't be able to discharge the debt, and you could still collect it from her personally.


Check with your attorney but probably not if the debt is listed properly on her schedules.

Also, check with lawyer if you can fine her now for things that occurred after the date that she filed for bankruptcy. The bankruptcy filing does not protect her for debts incurred after the filing date.

Very rarely will a lender pay the unpaid Association debt of its borrower. Ordinarily, that proves a complete waste of time. However, it doesn't cost the Board anything to try if it sends the notice of default out directly ...

The remedy is part of the PUD rider that the lender provided and the borrower signed.

You know, I used to work for the world's largest mortgage company and would come across thousands and thousands of that document over the course of 6 years. As a management company I have actually gotten a few to pay because I actually know how to track who services the loan. I also know what the legal meanings of :may", or "shall". There is NO "must". But thank you for pointing that out!

How many have you gotten to pay past assessments? Maybe you should just follow Ron's "come to Jesus parade" found here: http://www.hoatalk.com/Forum/tabid/55/forumid/1/postid/267836/view/topic/Default.aspx

It all depends on what is costs to ask.

Huh? You having a rough day, Richie?

I don't know when you worked for the mortgage company -- and frankly could care less -- but I deal with this issue on a regular basis as a litigation attorney to many HOAs and condo associations in Florida (and have for many years) and it is very rare for a lender to pay the Association for the accrued debt of the homeowner-borrower.

Since the OP indicated that the Association was in FL, I submit that my current, state-specific reply is more credible than your dated statement.

//And I could care less you're a, what, litigation attorney? I don't have a high opinion of any attorney//

If you can't appreciate the value of an experienced, honest legal advisor, then there's no point in attempting to converse with you, sir. I wish you well.

JZ,

Thanks for your insight.

Met with our counsel. Property owner has listed HOA debt, so will wait for September court outcome.

Our management company failed to push to lien prior to the Ch 13 ... previous Board didn’t monitor closely enough.

I think we’ll go to a process where we lien at 6 months vice 14-15 months.

The sooner you RECORD the lien the better.

(the lien already exists as per 'most' CCRs)

//JZ,

Thanks for your insight.

Met with our counsel. Property owner has listed HOA debt, so will wait for September court outcome.

Our management company failed to push to lien prior to the Ch 13 ... previous Board didn’t monitor closely enough.

I think we’ll go to a process where we lien at 6 months vice 14-15 months.//

Generally speaking, and as others have noted here, the earlier you record the lien, the better.

Having said that, it is also wise to look at the amount of superior priority debt encumbering the property before you pull the proverbial trigger. If the property is worth less than the amount owed to the superior lien holder, i.e., typically, an institutional first mortgage holder, then it matters little whether your Association records a lien against the property.

If there is insufficient equity in the property, i.e., the fair market value of the property is less than the first mortgage debt owed on it, together with interest, any unpaid real estate taxes and attorney's fees incurred by the first mortgage lender (the total amount of which is memorialized in the mortgage lender's proof of claim), your lien would be subject to being "stripped" in a chapter 13 proceeding.

Hopefully, your counsel explained this to you when you had your consultation.