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liens on house going to forclosure

Started by PeggyH • 27 replies • 1597 views

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PeggyH (South Carolina)
Posts: 36
Posted:
What happens if we have lien on a person for non payment of association dues, and now they are going to let their house be forclosed on? Will the association get their back dues or do we just take the loss?
HaroldS (Arizona)
Posts: 906
Posted:
Well depends on the mortgage holder(s); they usually have first crack at proceeds. (Taxes come first.) If there is enough equity to satisfy them then it depends how your state lists your liens in priority. However, if it is the mortgage holder doing the foreclosing, their concern is to recapture their money, and they will not be concerned about getting maximum value to satisfy other lien holders.
BrianB (California)
Posts: 2,820
Posted:
Yup, harold is right. HOA's get lined up with other liens, and are settled after the primary lienholder takes their share.

on the plus side: someday, that bank is going to want to sell that home, and those assessments remain unpaid, which mucks up the title, and hurts the potential buyer. I have had some luck in reminding realtors of that when they put their signs up on the property. Unofficially, of course.
HaroldS (Arizona)
Posts: 906
Posted:
Brian - I don't see the logic in your position. If an HOA lien or I assume any other lien remains after a foreclosure, that means a bank or whoever foreclosed would have to pay off all those liens before they can sell that property. In othre words being responsible for those liens. I doubt even a mortgage holder would foreclose on today's deflated properties which probably owe more than the current value, if in doing so they were required to pay off all other liens before they could sell it. Or are you saying a prospective buyer would have to pay off any HOA lien? If so, you can be sure it will lower the buying price, which would obviously affect comps. Which lower your neighborhood values even more.
Can you cite Arizona statute(s) which address this? Harold
BrianB (California)
Posts: 2,820
Posted:
Nope Harold, no statutes. That's why i simply mention it to realtors as a concerned neighbor, never as a member of the board. There is no legal obligation for the new owners/potential buyers to pay the unpaid assessments (that went down the tubes with the foreclosure), but... once a realtor knows anything potentially "bad" about a property, they typically disclose it to potential buyers.

So, a bug in the ear as we chat over the signpost goes a long way. I can simply say "Wow, did you know the previous owner left this place with about $1500 in unpaid dues? I imagine the HOA is going to be happy to have a new owner around to help pay those off."

Just because I know that the unpaid assessment doesn't transfer over doesn't mean i have to educate everyone about that. And i never said anything that wasn't true. The HOA will be happy to have a new owner around to help pay assessments.
HaroldS (Arizona)
Posts: 906
Posted:
LOL Brian. But I think good Realtors know what has to be disclosed and what doesn't. If there is no lien, then what is there to disclose? If he follows your suggestion, and mentions how thrilled the HOA will be to have a paying owner, it could actually discourage potential buyers, or perhaps lower the offer if they think they will be obligated to pay that $1,500.
BrianB (California)
Posts: 2,820
Posted:
realtors know what they think they need to disclose, but no realtor knows what some judge will think they needed to disclose.

lol.. remember, Arizona is the place where i actually had a judge tell me, in court, "I don't care what the law is, this is my court and I do it my way".

But you are right: bottom line, HOA's tend to lose in foreclosure, and nothing much can be done but chalk the loss up to the budget and raise assessments. And let the new neighbors know why everyone tosses eggs at their windows.
ShawnaF (Colorado)
Posts: 84
Posted:
Just for the record to the original poster - the lien is on the property, not on the individual. You might also speak to your attorney about getting paid. Regardless, getting money out of banks is totally easy - they HAVE it vs. the person facing foreclosure!

I don't know about your state, but do you have a Super Lien statute/law???
GeraldT4
Posts: 1,022
Posted:
BrianB - And you know this information regarding a lien on the property how? : )
BrianB (California)
Posts: 2,820
Posted:
probably because i placed it myself. Or i tended to keep watch of the HOA records when i wasn't in charge.

GeraldT4
Posts: 1,022
Posted:
BrianB - I understand and find what you are doing quite humorous. However, you mention this to Realtors as a "concerned neighbor", your words, but it does seem you know this because of your position on the Board, not that the Realtor cares or that it will come to anything. But...you never know. If you placed the lien yourself, you then did it in the capacity as a Board member, right? I'd stick to the story that I knew this because I keep watch of HOA records. : )
DJ1 (Ontario)
Posts: 798
Posted:
...and let's say the sale price IS dropped and it is learned that reason why was Brian disclosing the info. Guess what a good lawyer does? Sues Brian because he impacted the sale price for the seller. Course the buyer is still happy!
GeraldT4
Posts: 1,022
Posted:
DJ1 - Why would the seller sue Brian? The sale is a mutual agreement and requires a willing buyer and willing seller.
BrianB (California)
Posts: 2,820
Posted:
i just claim concerned person, full disclosure, free speech, educating the buyer, etc..

if that doesn't work, i simply claim Terrorist and Patriot, and sit back. It works for the current administration, it should work for me.
HaroldS (Arizona)
Posts: 906
Posted:
"And let the new neighbors know why everyone tosses eggs at their windows." I don't follow this logic Brian. Why are your neighbors throwing eggs at a new owner - becasue the previous owner didn't pay? Or is that just your association's way of welcoming new neighbors? They should be happy there is now a new owner who MIGHT pay timely, but now has to wonder why they ever bought there with such nice people as neighbors.
GeraldT4
Posts: 1,022
Posted:
BrianB - I wasn't trying to gang up on you by questioning your methods, I just thought you might get yourself into hot water. Though it seems your defense that you were doing no different than your countries current administration is so plausible that I'd let you go with a warning and a wink!! ; )
BrianB (California)
Posts: 2,820
Posted:
Harold, i won't be tossing eggs.... but i cannot guarantee you what other neighbors might do. SOme of them are crazy, and expecting logic from them? you might as well expect algebra from a chicken.

And Gerald, you had better let me off with a wink, if you want those phone conversations I illegally (but not illegally) tapped to disappear. Or unless you LIKE waterboarding...

EXECUTIVE PRIVILEGE!!!!!!

DJ1 (Ontario)
Posts: 798
Posted:
Gerald, We had a situation where a homeowner was selling. The issue came up with whether the Board/or a homeowner should disclose some potentially negative info to his Real Estate Agent, or a buyer, about this property (involving legal action pending that hadn't yet been filed). The lawyers group suggested that wouldn't be wise particularly if it resulted in a buyer backing off or canceling an agreement. You'd have a lawsuit from the seller.
The agent would have to disclose the info to buyers (or be in trouble if it was later learned he hadn't)
All around messy.
DJ1 (Ontario)
Posts: 798
Posted:
Above was referencing disclosure of non-public info. If the lien is filed wouldn't matter, but if someone mentioned something like Brian's comment,

"So, a bug in the ear as we chat over the signpost goes a long way. I can simply say "Wow, did you know the previous owner left this place with about $1500 in unpaid dues? I imagine the HOA is going to be happy to have a new owner around to help pay those off."

That may be different, especially if he knows this from being on the Board and no lien yet.
BrianB (California)
Posts: 2,820
Posted:
very true DJ and everyone else... you have to be careful. Gossip is gossip, free speech is free speech, and truth is an absolute defense against slander.

But in my defense, i knew who was behind dues even when i wasn't on the board. Association books are open to all owners.
DJ1 (Ontario)
Posts: 798
Posted:
Quote:
Posted By BrianB on 02/26/2008 8:17 PM
very true DJ and everyone else... you have to be careful. Gossip is gossip, free speech is free speech, and truth is an absolute defense against slander.

But in my defense, i knew who was behind dues even when i wasn't on the board. Association books are open to all owners.

So an buyer wouldn't have access to the info but not for a HOA member. Hmmmm, might still be a problem for the 'spokesperson'.
BrianB (California)
Posts: 2,820
Posted:
lol.. read your prospectus carefully before investing.

HaroldS (Arizona)
Posts: 906
Posted:
"lol.. read your prospectus carefully before investing." Especially if Brian is involved? LOL. Harold
BrianB (California)
Posts: 2,820
Posted:
absolutely harold.. you know those things that suck onto sharks, and hang off them as they swim?

that's me!
BruceD1 (Georgia)
Posts: 59
Posted:
What if... the assesment to the HOA is related to fines i.e. fence does not meet the guidelines, etc. When the new homeowner moves in they are not excused from the violations. Fines would continue?
BrianB (California)
Posts: 2,820
Posted:
Good question bruce.

First, many states have made it nearly impossible to lien a home for fines, so the chances of a lien in foreclosure for fee non payment is slimmer than for assessment non payment.

IMO, the new homebuyer should be immediately made aware of non compliance issues, and given a "reasonable" chance to correct them. Then, the fines begin NEW for that owner (ie, the unpaid fines do not carry over).

these situations should be handled with as much tact as possible by the board.
DJ1 (Ontario)
Posts: 798
Posted:
Oh GREAT Brian!

NOW the Seller is going to have to go back and sue the seller cause the seller didn't disclose there were outstanding violations, that the HOA intends to force the buyer to correct...and incur the expense to do so!

- Or maybe the seller's will file a claim on his title insurance to cover these costs. (hope he bought some!)

- Sure hope the title insurance company doesn't hire a lawyer to fight the HOA in court over these outstanding violations (if they figure it is cheaper than paying out the claim). Could be quite costly to all members when the HOA has to hire a lawyer to defend itself in court.
BrianB (California)
Posts: 2,820
Posted:
On the plus side DJ, either the seller or the HOA is required by most states to provide a copy of the CCR's, etc. to the buyer prior to closing.

One might assume a defense of "Well, i gave you the rules, Mr. and Mrs. Buyer. You should have read them before you signed the last line"

I know that in my dealings with realtors (buying and selling) and Title companies/Loan Companies (as an HOA board officer), it frequently is asked on various forms, etc. "are there any conditions" or "violations" or "outstanding issues" around the home, HOA rules, codes, etc.. Everyone trying to cover their behinds for infractions that may be there.

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