Self Governed HOA with 2 residents refusing to pay dues

MelanieN (South Carolina)
Posts: 18

Posted:

I am on the board of our small HOA in South Carolina and we have two residents that either can't or refuse to pay their HOA dues. They were due at the beginning of the year. We have sent many letters. One of the houses was purchased by an out of state (NC) company and we have not received any response to our repeated requests for payment. Does purchasing a home under a business name protect the people living there from having to pay their dues? They have previously stated that they own the business but the registered agent for this North Carolina business is not a person living in the home. We are considering on filing a lien on both of the past due properties as these people are blatantly not paying. The home that is owned by a LLC is also violating every possible rule. Parking 4 cars in the street etc.......our covenant states 2 cars per home in provided two car driveway and NO street parking at any time. (Our road is very narrow and with the parking situation, an ambulance and firetruck will not be able to get through.) Anybody have any advice for us ladies running our HOA? We are not very experienced at this but have done what we can thus far to try and save our little neighborhood from the high cost of a management company.......

PLEASE HELP Ya'll!

(Yes, I have sent fine warnings and fine notices per outlined rules along with Total amount due notices)

KellyM3 (North Carolina)
Posts: 2,239

Posted:

Hi Melanie,

Regarding collections of delinquent dues, my recommendation is hiring an HOA attorney versed in state collections laws. Your HOA (depending on state law) can likely pass most of the collections legal fees to the delinquent property owner.

Regarding illegal or unsafe parking, my recommendation, again, is an HOA attorney in lieu of experienced property management who can unemotionally handle issues on behalf of community members.

Both situations are symptoms of DYI community management. It's not easy to run a community when times get rough and emotions run high.

MelanieN (South Carolina)
Posts: 18

Posted:

Yeah, we were prepped by our attorney that originally wrote our covenant on the trouble with a DYI management but with only 9 homes.....it seemed pointless to spend another $3,000 a year to hire a management company. That would double our yearly dues.

I guess I need to check in with some attorneys and see what we can do. We are just trying to save everyone money but this LLC owned newcomer is like a cancer to our small community.

Anyone else have any ideas that might help us that doesn't involve spending thousands of dollars?

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Mel

You should files liens. In some states a lawyer is not needed to do so. Worst case, as few hundred dollars to a lawyer to file the liens.

MelanieN (South Carolina)
Posts: 18

Posted:

Yeah, I don't think a lawyer is required in my state.
Do you suggest us send an "Intent to file lien" letter prior?
We have given them plenty of notice that they are due. And with every fine letter I send, I have been sending a new "Total Amount Due" letter. We are not trying to be petty. The people occupying this home are taking pictures of everyone's properties when they THINK someone else might be violating the covenant. We just want people to be respectful and until this is under control, we have to go this route.

SheliaH (Indiana)
Posts: 6,964

Posted:

I get wanting to save money, but you may as well accept the fact that you may come across situations where you'll have to spend some money to collect delinquencies. Unfortunately, it can wind up throwing good money after bad as you try to figure out if the house has a mortgage, how the mortgage company will respond to the lien, who's running the show at the LLC and all that.

Lori and John have the right idea - file the lien and see what happens. That's probably the best option at this point - you could go to small claims court, depending on how much is owed, and get a judgment, but then there's the matter of collecting (more time and money, which you don't have). Oh, and you might want to check if there's a bankruptcy pending on the house or LLC - if so, get a proof of claim filed quickly, as that may be your last and maybe best chance of getting ANY money back (equally time-consuming).

You may find you can handle the individual homeowner a little differently than the LLC because LLCs are set up to operate businesses without putting the owners' individual assets at financial risk. The law works differently by state, but I dealt with a few while I was board treasurer and it wasn't easy at all. Just be consistent in case someone tries to yell about selective enforcement and make sure whatever legal action you do take makes the owner responsible for all costs incurred in pursuing the debt (attorneys' fees, court costs, filing liens, etc.)

PS - the LLC stuff is why you may want to talk to the other homeowners about amending your documents to prohibit renting out the unit for two years after purchase. Investors usually don't like to buy into communities with these restrictions and if your documents require homeowner approval for amending them (likely), you may want to jump on this now before more investors move in and make it impossible for you to do anything. Right now, it appears the individual homeowners might have an advantage with the numbers. You can always include a hardship exemption and perhaps put a limit on that too, such as renting the home cannot exceed a year.

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

SheliaH (Indiana)
Posts: 6,964

Posted:

Excuse, I meant Kelly also had the right idea!

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

MelanieN (South Carolina)
Posts: 18

Posted:

Yes, I completely agree. We definitely should amend the covenant. I will definitely bring that up next time our board meets.
The LLC is fairly new and is not under a mortgage or bankruptcy. Seems as thought these people purchased the home and thought they could be above the rules of an HOA. I don't think they are used to being told that they can't do whatever it is they want to do. Afterall, their business is registered to a mobile home off of a dirt road in the middle of NC.

We will file a lien asap. Just need to get to the courthouse to see what needs to be done.

ThadC2 (Florida)
Posts: 820

Posted:

please let us know if you are successful in a DIY lein filling. good luck.

MelanieN (South Carolina)
Posts: 18

Posted:

Absolutely

I am happy that I found this forum though.
I always like to have a second opinion on certain matters

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Make sure you follow a process before just filing a lien. Our HOA had an established policy in place. That was 6 months behind we liened. 1 year we CONSIDERED foreclosure. You want to make sure you are sending notices to the right address. Plus you want to send them certified mail. If they do not respond to them and sent back DO NOT OPEN!. You want proof your HOA reached out to their address at least 3 times certified. A rejected letter can show proof of they were sent notice. I would above all send notices to the HOA address itself as well. That way can show you sent to the HOA address not just the offsite one.

A LLC is a bit more difficult to deal with when it doing a lien/collection. I like to call them "The one who draws the short straw does the prison time" corporations. Your dealing with multiple owners whom have a corporate shield. It's not illegal to own HOA property as an LLC it is just more difficult to collect from. You usually have to battle several of the corporate owners till you get one willing to pay up for them all.

Keep in mind that a lien/foreclosure is a "stop the bleeding" step. Don't expect to make more money than what is owed including filing fees.

Former HOA President

MelanieN (South Carolina)
Posts: 18

Posted:

Thank you so much for your advice! This just shores up the fact that I have been doing the right thing.
I have sent at least 3 notices via certified mail and we are 6 months into the year and our dues are due at the beginning of the year.
These particular people have been very difficult to deal with. Nice communication has not worked as the lady of the house just comes out the door cursing and screaming at anyone on the board that comes near to deliver a newsletter by hand.
I have sent the certified notices to the business' registered address as well as the actual property in question's address. Costing us $8 per notice. None have been returned. All accepted by an individual.
I honestly do not think that we have an established policy in place because we have never had this issue in the past.
Do you suggest that I send an "Intent to file lien" notice prior to filing the actual lien?

MelanieN (South Carolina)
Posts: 18

Posted:

Thank you so much for your advice! This just shores up the fact that I have been doing the right thing.
I have sent at least 3 notices via certified mail and we are 6 months into the year and our dues are due at the beginning of the year.
These particular people have been very difficult to deal with. Nice communication has not worked as the lady of the house just comes out the door cursing and screaming at anyone on the board that comes near to deliver a newsletter by hand.
I have sent the certified notices to the business' registered address as well as the actual property in question's address. Costing us $8 per notice. None have been returned. All accepted by an individual.
I honestly do not think that we have an established policy in place because we have never had this issue in the past.
Do you suggest that I send an "Intent to file lien" notice prior to filing the actual lien?

MelissaP1 (Alabama)
Posts: 13,836

Posted:

You may want to find out if that is part of the process in filing a lien. It would not hurt to give them a notice of the intent to file a lien within a reasonable time period. Would not go past 30 days. That is when would file the lien and let them know it's filed.

Former HOA President

MelanieN (South Carolina)
Posts: 18

Posted:

Ok perfect! This was totally my thought process

I greatly appreciate your advice here everyone! We are just some hardworkin', sweet single mom's trying to protect our hard earned money.
Always one person ruinin' it for everyone

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Melanie

I just realized, stupido me, your are in SC. An Officer of the BOD may file a claim in Magistrates Court thus getting a court order for them to pay. No need for a lawyer. Stop at your local Magistrates Court and inquire. They will be more then glad to help you.

MelanieN (South Carolina)
Posts: 18

Posted:

You rock! Thank you so much 🙏🏼

KellyM3 (North Carolina)
Posts: 2,239

Posted:

I sincerely cannot believe this forum recommended a DIY lien filing for a situation where a person doesn't know how to handle an issue. This is disappointing, even for a Peanut Gallery-fueled (and sadistically fun) HOA online bulletin board.

MarkR21 (North Carolina)
Posts: 710

Posted:

Quote:

Posted By KellyM3 on 06/16/2022 3:27 PM
I sincerely cannot believe this forum recommended a DIY lien filing for a situation where a person doesn't know how to handle an issue. This is disappointing, even for a Peanut Gallery-fueled (and sadistically fun) HOA online bulletin board.

A diy lien is the same as a professionally filed lien? Isn’t it just paperwork being filled out? Worst case secenario they filled it out wrong and have to file it again. Taken into perspective is that realty that big of a deal. It’s not like diy heart surgery

KellyM3 (North Carolina)
Posts: 2,239

Posted:

For HOA business, it is a big deal. Yes. It's all in proportion and when you're inexperienced, you will waste tons of time and the HOA will not get results.

JeffT2 (Iowa)
Posts: 880

Posted:

A recorded lien is a legal claim against the owner's property. If Melanie records the lien without doing everything the law requires, then the lien may not be right and owners might have a case of slander of title against the association. The wording of the lien, required notice, the wording of all the letters that were sent, and sending it to the right agent of the corporation, all have to be right.

Why DIY when you can hire a lawyer and add the legal fees to the amount that is owned?

I would first line up a lawyer or two by getting free consultations, along the lines of "can you represent us if these guys do not pay"?

Then write a final demand letter with notice of intent to turn it over to a lawyer who will record the lien on the property and add legal fees to what they owe.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

We have to hire a lawyer to file a lien. If you want to save money, may be able to find legal services to assist. This is not a court case. It's filing of an legal instrument. Legal service can simplify the process and limit costs. Your most likely paying the fees/costs of filing/serving than paying the hourly rates of advice/cohsultation fees lawyers can tag on.

Former HOA President

SheliaH (Indiana)
Posts: 6,964

Posted:

Quote:

Posted By JeffT2 on 06/16/2022 4:59 PM
A recorded lien is a legal claim against the owner's property. If Melanie records the lien without doing everything the law requires, then the lien may not be right and owners might have a case of slander of title against the association. The wording of the lien, required notice, the wording of all the letters that were sent, and sending it to the right agent of the corporation, all have to be right.

Why DIY when you can hire a lawyer and add the legal fees to the amount that is owned?

I would first line up a lawyer or two by getting free consultations, along the lines of "can you represent us if these guys do not pay"?

Then write a final demand letter with notice of intent to turn it over to a lawyer who will record the lien on the property and add legal fees to what they owe.

Indeed. If Melanie's association doesn't have a formal collection policy, they need to establish one immediately, especially since she lives in a small community where two deadbeats can really turn the budget upside down.

Our policy states that homeowners will be responsible for ALL costs incurred in pursuing a delinquency, which would cover attorneys fees, lien filing fees, skip tracing and whatever else has to be done. The association attorney (or an attorney who specializes in collecting delinquent HOA assessments) can help you prepare one and the board should be evaluating it every year to see what works and tweak as necessary. Same with the attorney - if you sign a letter of engagement with him or her, you should get an itemized list of costs so you'll know exactly how much the initial outlay will be.

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

MelanieN (South Carolina)
Posts: 18

Posted:

Yes, I completely agree with you. I have sent out an "Intent to file" letter to these two homeowners and YES, two deadbeats WILL turn our budget upsidedown. Attached to the letter of intent is a itemized list and description of the moneys owed to our POA. These homeowners were notified just like everyone else at the beginning of the year of our budget and what everyone is responsible for. We have quite a bit of property taxes that we have to pay for commons areas and our private street. They are just being incompetent. I have done my research and have asked confirmation from several people including the law office that originally wrote our covenant. He stated that this is something we should be able to handle on our own. But I have attained quotes from several management companies to take over should these people refuse to take care of their responsibilities. If working for ourselves to save money for everyone doesn't work, we have a very expensive backup plan. One we are trying to avoid.

Thank all of you for your help.
As to the comment criticizing this board for helping me answer a few questions.....shame. They answered the questions I asked. And I am greatly appreciative and happy to be a part of this great forum. Not all of us live in a 300 home neighborhood and pay $30 a month.

KellyM3 (North Carolina)
Posts: 2,239

Posted:

There's no criticism. There is advice offered by some of us so that your HOA as a whole can experience better operations and solutions based on our mistakes.

When an HOA board cannot collect dues on some accounts and doesn't know how to collect, the belief that this same board (or a director) can enter the legal process and navigate it successfully is not doing the community a service. Placing a lien will not accomplish any collections goal for HOA operations, it's a part of the solution. It sounds like the principle of saving HOA money is greater than the HOA need to tangibly collect delinquent dues that are owed. That's fine and is not without precedent.

I will always wish you the best because HOAs are often given a bad reputation unfairly.

MelanieN (South Carolina)
Posts: 18

Posted:

I can understand that. Once we follow through with the Lien process, we will be hiring a collections company to help us to move forward. We are hoping that it does not come to any of this. Our hope is that sending our "Intent to file" letter, will make it known that we mean business....and we do. We have been bullied by both of these homeowners long enough and will not tolerate it anymore. The latest one in particular thinks that the rules just don't apply to them because they purchased the home under a LLC. The occupants are not even officers of the LLC that purchased so they are not even qualifying members. We do not allow parking on our private road because of emergency access (very narrow road).....and they also think that they do not have to follow those rules either. Its just a big mess. If we have to, we WILL hire a management company that is tough enough to handle these bullies. In the meantime, we are trying to avoid that to save money for the neighborhood. I will update and let you know how it pans out.

MelanieN (South Carolina)
Posts: 18

Posted:

I can understand that. Once we follow through with the Lien process, we will be hiring a collections company to help us to move forward. We are hoping that it does not come to any of this. Our hope is that sending our "Intent to file" letter, will make it known that we mean business....and we do. We have been bullied by both of these homeowners long enough and will not tolerate it anymore. The latest one in particular thinks that the rules just don't apply to them because they purchased the home under a LLC. The occupants are not even officers of the LLC that purchased so they are not even qualifying members. We do not allow parking on our private road because of emergency access (very narrow road).....and they also think that they do not have to follow those rules either. Its just a big mess. If we have to, we WILL hire a management company that is tough enough to handle these bullies. In the meantime, we are trying to avoid that to save money for the neighborhood. I will update and let you know how it pans out.

MelanieN (South Carolina)
Posts: 18

Posted:

I can understand that. Once we follow through with the Lien process, we will be hiring a collections company to help us to move forward. We are hoping that it does not come to any of this. Our hope is that sending our "Intent to file" letter, will make it known that we mean business....and we do. We have been bullied by both of these homeowners long enough and will not tolerate it anymore. The latest one in particular thinks that the rules just don't apply to them because they purchased the home under a LLC. The occupants are not even officers of the LLC that purchased so they are not even qualifying members. We do not allow parking on our private road because of emergency access (very narrow road).....and they also think that they do not have to follow those rules either. Its just a big mess. If we have to, we WILL hire a management company that is tough enough to handle these bullies. In the meantime, we are trying to avoid that to save money for the neighborhood. I will update and let you know how it pans out.

TomB28 (Florida)
Posts: 5

Posted:

I would make sure you have power of lien.

MelanieN (South Carolina)
Posts: 18

Posted:

What does "Power of Lien" mean?

MelissaP1 (Alabama)
Posts: 13,836

Posted:

I think they mean it is in your documents you have the ability to file liens or foreclose. Most HOA's can lien/foreclose. It's more fines that HOA's can or can not file.

Former HOA President

MelanieN (South Carolina)
Posts: 18

Posted:

I will double check but all HOAs have the ability to do that from my understanding. Foreclosing however is a gray area. When I go to actually file the liens, I will definitely speak to the Magistrate and make sure it is all done properly. I have kept all records.

TomB28 (Florida)
Posts: 5

Posted:

Power of lien number one means the HOA statute authorizes the HOA to record a lien, then number two it has to be authorized in the covenants. This varies depending on the State.

TomB28 (Florida)
Posts: 5

Posted:

Power of lien number one means the HOA statute authorizes the HOA to record a lien, then number two it has to be authorized in the covenants. This varies depending on the State.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

From our SC Covenants:

...Asessments and fines.....shall be a charge on the land and shall be a continuing lien upon the Lot against which each assessment is made in favor of the Association and the Association shall be entitled to file a document evidencing such lien in the land records of the county in which the Lot is located.

Meaning one agreed that the association already has an existing lien on a lot and the association is entitled to file it.

TomB28 (Florida)
Posts: 5

Posted:

Covenants or Statute Law? The covenants can be drafted to say anything, but the actual statute law of the State must authorze the power of lien. And alos what they can do with the lien as far as foreclosure. In Florida the HOA can actually take a home in foreclosure under Statute 720.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

In SC an HOA can file lien based on unpaid fines but cannot foreclose based on fines. Can only foreclose based on unpaid assessments.

MelanieN (South Carolina)
Posts: 18

Posted:

Yes. This is what I am aware of.
After sending the intent to file to the two homeowners, we were successful in getting one of them to pay. The other people are the people who have a business name listed as owners of the property and just think they don’t have to pay.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Good for the one. LLC's are more difficult to deal with than an individual. You have to file under the LLC name most likely. It may then transition to whom in the LLC pulls the "short stick" who individually pays amongst them. Have had to deal with an LLC before. There are certain protections being incorporated protects against. However, not paying dues is not one of them. It's going to be hard to pierce the "corporate shield" but it can be pierced in an LLC. It just may be more complicated as it's multiple individuals who own. It may be you have to break it down to lien individuals till one of them coughs up the money. Good luck!

Former HOA President

MelanieN (South Carolina)
Posts: 18

Posted:

Thank you for the insight....I was wondering how that would work. We have another LLC that owns in our neighborhood as well.....but they obviously know that they have to pay their bills. These people that live in the house are very difficult to deal with. The wife has a nasty attitude.

DawnW7 (South Carolina)
Posts: 14

Posted:

Melanie, what was the outcome?

MelanieN (South Carolina)
Posts: 18

Posted:

The LLC ended up being a fraudulent company out of NC and had borrowed money for the house from a dumb real estate firm in Raleigh. That firm was not aware the people were frauds until I finally reached out to the directly. They even got dumber and offered the people another mortgage in their personal names. All in all, assessments got paid and fraudsters identified. Just hate that I have to live in a neighborhood with people like that. They have wrapped up quite a lengthy list of court cases of them committing fraud stealing from individuals in our county.