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ChrisW4 (Georgia)
Posts: 16
Posted:
'm in Georgia. Our HOA has a lien against a seriously delinquent unit in our complex - the owner hasn't paid HOA dues in almost three years and now owes over $10K including penalties and interest. The owner (absentee, BTW) also has the unit for sale as a pre-foreclosure, but it listing for far above what anyone can reasonably assess fair value. As such we expect this unit to be foreclosed on eventually. The current listed mortgage is very close to what the last unit sold for here, so I doubt there will be any equity in such a case after the bank reclaims their share.

We've been operating on the understanding that if the unit does get foreclosed on, our lien becomes unenforceable. However, a TV house-hunting show mentioned that buying a foreclosure can expose one to "unexpected issues, including prior liens". While I'm not dumb enough to take the word of a television show as gospel, it has made me wonder if our assumptions have been incorrect.

So the question is, if the unit is foreclosed on, does our lien, in fact, get wiped out? If not, would it be the bank's responsibility to pay the lien, or whoever the bank eventually sells the unit to? And if this is the case, would it possibly be worthwhile, given the amount owed, to start foreclosure proceedings ourselves?
MicheleD (Kentucky)
Posts: 4,491
Posted:
SOME liens might survive a foreclosure, but in our HOA, the HOA liens for assessments do not.

Our CC&Rs have language specific to that and foreclosure is the only thing that wipes out our lien. It remains intact through bankruptcy.

An attorney told me once a long time ago that most HOAs in Kentucky are written that way because it's a state thing.

BrianB (California)
Posts: 2,820
Posted:
I'm no lawyer, but i believe that in Arizona, the liens survive, and either must be paid by the bank upon foreclosure, or pass through to the eventual buyer from the bank. The lien survives and messes up title clearance, that much i am certain of, so whoever eventually buys it will not be able to get a clear title.

ShawnaF (Colorado)
Posts: 84
Posted:
The Lien laws can be so complicated. In Colorado we have the Super Lien - I'm not all together knowledgeable about it, but I know a portion survives bankruptcy/foreclosure and the rest comes due after 1st Mortgagee. But since it stays with the address rather than the individual, I think in most cases the entire lien would be paid eventually, in particular if a bank is involved. Heck, at least the bank is one that HAS the money!
HaroldS (Arizona)
Posts: 906
Posted:
"And if this is the case, would it possibly be worthwhile, given the amount owed, to start foreclosure proceedings ourselves?"
Why would you want to pour more money into this by foreclosing yourself? You previously said the existing mortgage was pretty near the going price of your units. In a forced sale it would probably bring even less. The mortgage holder would still be ahead of you. You don't go to first place just because you foreclosed first. Someone will have to satisfy the mortgage before you get a dime. But I'm sure the mortgage holder would love for you to do all that work for them.
Brian - can you point me to your source where in Arizona, liens are transferred to a new owner? Who would buy a property encumbered with existing liens? Even if they would and found someone to issue a mortage - the HOA lien would still be secondary to a new mortgage. What would be the advantage of that? That could go on and on for years. Or are you expecting the new buyer to pay off these liens to get a clear title? If they did, you know they aren't going to pay fair market value and also pay off those liens, and that would affect the comps of all other units or homes in the area. I'm getting confused.
BrianB (California)
Posts: 2,820
Posted:
sorry harold, i don't have a citable source... just some info picked up when our HOA was in a similar situation. we were told by a realtor that if a bank foreclosed, they would have to work out payment on the lien, since clear title would never be received if they tried to sell it after foreclosure.

THe attachment of the lien prevents people from entering foreclosure, then buying back the property through a second party after the liens were erased by the foreclosure action. It may not be true, just what i understood from some chats with a realtor and a title researcher.

BrianB (California)
Posts: 2,820
Posted:
upon a bit more research: I guess it all depends on the type of lien your HOA gets, and how that type of lien is ranked in the state law system, higher or lower than the one being foreclosed, etc....

If your lien is superior enough, the new buyer of the home must pay it. if it is inferior to the foreclosure lien, then the original debtee still owes the lien. Also, in some jurisdictions, if the forecloser does not notify some types of lienholders of their intent to foreclose, then the lien remains on the property after foreclosure.

your results may vary, batteries not included.

LindaM5 (Texas)
Posts: 32
Posted:
If my 2 cents count, we had a similar situation in our HOA in Texas. We LOST our $3K lien (no dues paid + late fees, fines, penalties, etc), when the property foreclosed. We could not collect.
HaroldS (Arizona)
Posts: 906
Posted:
If a mortgage holder doesn't recoup enough to cover their own mortgage, why would it be their responsibility to use their funds to pay off other lien holders who are secondary to their mortgage lien?
It sounds like in today's environment that HOAs cannot rely on a lien to get their money, but should be more aggressive in other legal avenues of collection.
DonnaS (Tennessee)
Posts: 5,671
Posted:

Right Harold,

A lien by a HOA is somewhere down on the list of payment due in the event of a foreclosure and usually when people get so bad off that they are in foreclosure , it is usually too late for the HOA to get any collection. We had one that listed the HOA is 14th priority. Needless to say, we got nothing.

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