Acting in good faith?

Our board is being requested to vote on foreclosing on a property which sadly is happening more than usual. The board usually waives all fines minus a minimal amount since the fines are really just to get people to fix things that need to be addressed. When the homeowners request fee relief then we grant it (but they have to ask at this point). So here's my question, the member reached out to provide a timeline to address the issue (within a month) and then the fines would be forgiven etc. Since a lien the homeowner needs to correspond with the law firm who will then send the request to us. So basically we need to wait for him to send it to the attorney and then come back via that avenue. In the meantime the board is voting on if we should proceed with foreclosure. It feels like if we move to foreclose because he didn't technically send it the right way knowing it should be coming back through the correct channels feels like we're being punitive and not negotiating in good faith. I'm not opposed to doing the foreclosure but it seems at this point we're just generated legal and management company fees. We do not forgive any legal / management company fees as those come out of pocket vs the "play" money that are fines.

I have other issues with the collection process but that's another thread. Is it not my fiduciary duty to the board is to make sure it gets fixed (which the liens seem to have started) but is it also not to the homeowner to not levy unnecessary fees?

Am I making too much into this? Should I be concerned?

John

Mel is correct. Typically an HOA can not foreclose based on fines. Granted some, even attorneys, will disagree with this. Whiles fines are all well and good, if the person is paying their dues they are not financially hurting the association and many judges will look at it this way.

Any payment plan, other than attorney fees, is up to the BOD to accept or decline. Granted the attorney might lay the plan out to the owner, but it is up to the BOD, not the attorney to accept.

Attorney fees are above and beyond anything owed to the BOD and they are up to the attorney to decide how to handle.

In our case, we pay the attorney for warning letters and lien fees and those feesare added to what the owner owes the BOD.

In so many ways!

We go through this every time....

Some states DO allow foreclosure for unpaid fines, and mine is one of them. Whether or not those fines add up to enough money to justify foreclosure is a different question.

Foreclosures need to make financial sense for the HOA, and courts are more likely to rule in favor of the HOA when it appears that the HOA has done everything by the book (and yes, that will generate additional charges, no way around it). I think you'll be able to judge whether or not you're just trying to run up fees unnecessarily, which I agree is not justified - and which may hurt the HOA in the long run if you end up in front of a judge who thinks HOAs are all bullies.

An owner who has been paying in dribs and drabs is probably not a good candidate for foreclosure - a court will likely view that as an attempt to pay. One who has stopped paying altogether and is not responding to the HOA is a good candidate for foreclosure.

I do agree that if the homeowner is communicating with the board and is in the process of at least trying to deal with this that proceeding with foreclosure now doesn't make much sense, since a court is much less likely to rule in the HOA's favor.

To be clear, though, the board's fiduciary duty is to the HOA, and many governing docs require the board to foreclose when appropriate. It's not a question of being a nice guy to a homeowner who is struggling, although most people would feel compassion for the owner in such cases. But the board should not put the interests of a single owner ahead of those of the rest of the community who will have to pay more to make up for the lost revenue.

It's hard to be a board member when you're dealing with a homeowner who has fallen on hard times through no fault of his own, no doubt about it.

It appears it can be done in N.C. Here is an excerpt from https://www.lawyers.com/legal-info/bankruptcy/foreclosures/hoa-foreclosures-for-cc-rs-violations.html. Note the two foreclosure methods and that you have to do the second one provided below.

"But under North Carolina law, an HOA can’t use a nonjudicial process to foreclose an HOA lien if the lien consists solely of fines, interest on unpaid fines, or attorneys' fees that are associated with fines. Instead, the HOA must foreclose judicially by filing a lawsuit. So, the homeowners get one last chance to convince someone (a court) that they don’t deserve to lose their home over a dispute with the HOA."

What the he!! do I know....LOL

We have conflicting legal opinions but personally I would hate to "defend" fines whne they can be quite capricious even when there is a fining schedules. No paying dues is black and white. Not so with fines.

HOLY SMOKES you guys and gals are fast.

So let me clarify about the payment issue that I think causes some of this problem. The management company pays in the order of legal fees, fines, then assessments. Members had no balance until fines racked up then we're unable to pay their assessments as the management company wouldn't accept them. I feel like there may be some interesting practices because all the foreclosure activity started after January when they became late on assessments.

So I'm this case the foreclosure isn't related to just fines because enough time passed to make their assessments late. I believe the payment order may not be ideal...

Great feedback thank you!

I agree with Max's citation here. As directors acting in good faith--your actual subject-- we ought to vote to do what is best for our Association.

I'm sure this is true in some states and not in others. I'm not aware of any federal law on HOA foreclosures that would apply to all states.

The attorney wouldn't be advising the foreclosure process if foreclosure was not an option in this case.

That said, if the property owner is taking actionable steps with the attorney to remedy the situation then the HOA board should NOT foreclose until the attorney determines the property owner isn't acting in good faith or is stalling. The HOA board is choosing (rightfully) to have all contact go through the collections attorney but, in North Carolina, that will greatly slow the communication to a minimum of several months before the HOA's complaint can be relieved.

Your HOA board, from my perspective, is impatient. This is a slowwww process in NC, like watching paint dry. Besides, a foreclosure won't get the property matter addressed any quicker at this point, especially since this foreclosure threat isn't due to due delinquency

For what it's worth, my HOA board has been advised that "yeah, you can foreclose on non-dues debt but you'll face a judge...and a "poor property owner"...and you're the HOA." The retail politics of it do not look good. You could lose.