When to start foreclosure?

Started by GloriaL • 12 replies • 1344 views

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GloriaL (Georgia)
Posts: 195

Posted:

I hope someone out there can answer this question.

We are in the midst of legal action with one delinquent HO for 2009 Annual Dues that were due January 31, 2009 for $330.

First the HO ignored all communications from the BOD, then ignored them from our Attorney, then said they weren't part of the HOA. Then offered a partial settlement which the BOD rejected. Then offered a second partial settlement which the BOD also rejected. They were told the HOA will accept nothing less than full payment owed (because our attorneys will take their legal fees first out of the settlement and then the leftover $$ will go to the HOA).

They now owe approximately $400 in Anual dues, late penalty and interest. They also owe approximately $600 in associated legal fees.

The question:
Does anyone know if there is a threshold $$$ figure which must be reached in the state of Georgia before foreclosure can/should be initiated?

Just wondering....
Gloria

KirkW1 (Texas)
Posts: 1,665

Posted:

Well, I think you should accept some sort of payment plan. If they are willing to work toward paying the thing off, then you should give it a try. You clearly do not understand some facts.

First, if you foreclose then you will be out ALL of your money. The $330 in dues, and the $1000+ in lawyers fees. Somehow this does not seem like a win to me. The reality is that the bank's lien is of higher precedence and they will foreclose on the HOA. This will leave the HOA with nothing. Once again for the third time foreclosure will cost you the entire amount of money including the cost of the attorneys.

With that out of the way, you may or may not care, but your HOA is one of the poster children in the crusade to remove the ability of an HOA to foreclose for lack of payment. In short order you have more then doubled the expense to the owner and are actually talking about taking their home. By the way, this is supposedly your neighbor. Maybe this is just me, but taking my neighbor's house just isn't an easy thing to do.

GlenL (Ohio)
Posts: 5,491

Posted:

Gloria, I can't find a trigger amount or a minimum time in the GA statutes to initiate a foreclosure: http://www.communityassociations.net/ga_poa_act.htm (section 44-3-232)

As Kirk posted you should a written collection policy which should spell out the step by step procedure that will be taken by the HOA to collect and it should be provided to every homeowner; CA requires it to be given annually. It's when you try to make it up as you go that you get into trouble. I posted a list of policies and procedures every HOA should have in place before they were needed and collection policy was number one. See: http://www.hoatalk.com/Forum/tabid/55/forumid/1/postid/81934/view/topic/Default.aspx

Studies show that 5 out of 4 people have problems with fractions

GloriaL (Georgia)
Posts: 195

Posted:

Quote:

Posted By KirkW1 on 10/03/2009 7:10 PM
Well, I think you should accept some sort of payment plan. If they are willing to work toward paying the thing off, then you should give it a try. You clearly do not understand some facts.

First, if you foreclose then you will be out ALL of your money. The $330 in dues, and the $1000+ in lawyers fees. Somehow this does not seem like a win to me. The reality is that the bank's lien is of higher precedence and they will foreclose on the HOA. This will leave the HOA with nothing. Once again for the third time foreclosure will cost you the entire amount of money including the cost of the attorneys.

With that out of the way, you may or may not care, but your HOA is one of the poster children in the crusade to remove the ability of an HOA to foreclose for lack of payment. In short order you have more then doubled the expense to the owner and are actually talking about taking their home. By the way, this is supposedly your neighbor. Maybe this is just me, but taking my neighbor's house just isn't an easy thing to do.

I am sorry if you have gotten the wrong impression that the BOD is running to foreclosure and tossing these financially stricken HO's out on the street. That is not the case. Back history with this HO was not given. Each year, they are many months late paying their Dues after many letters by the BOD, emails, and finally knocks on the door trying the personal, friendly touch. Finances are not an issue with them as both are white collar professionals, educated with doctorates. The sticking issue is they do not want to abide by the CCR's, and have had one violation after another, although all small annoying ones (to other neighbors), and have had to address them. By their withholding their Dues, is their method of striking back.

This year they have just decided to really procrastinate and push the limits. They have claimed they don't belong to the HOA, so our attorney had to research that issue ($$ billed), write a letter stating that (more $$ billed), add late penalties and interest. They are unwilling to institute a payment plan for the amount owed, only the amount which should have been paid excluding all attorneys' fee.

We have collected on two other Lots under the "threat" of foreclosure. In this case, that "threat" may have to have more behind it and I was just trying to collect facts.

If they paid their Annual Dues on time like every other HO in our Community (who now all have to bear the additional cost of these HO's delinquent Dues), this would not be an issue.

Gloria

GlenL (Ohio)
Posts: 5,491

Posted:

Gloria I would consult with the attorney and ask their opinion of when to initiate foreclosure proceedings. Set a date limit and when they reach it send the ten day notice of the Association's intent to foreclose if they don't pay up. The trick is if they don't pay, you have to do it, if they perceive the threat to foreclose as just a threat; they will just keep stringing you along. As an alternative you could try garnishing their wages or if your CC&R's allow, inform their mortgage holder of their delinquency. You also have the right to ask the court to appoint a receiver and collect rent from them during the foreclosure action.

Studies show that 5 out of 4 people have problems with fractions

GloriaL (Georgia)
Posts: 195

Posted:

Glen,
Our attorneys have advised to wait for the amount to build, and see if the HO's pay 2010 Dues. They also have advised that a lawsuit could cost $1,000 +, and perhaps the judge would throw out the legal expenses from the judgement, which would then become the HOA's responsibility. That doesn't seem at all fair to me. Again, if the HO would just have paid their fair share like everyone else is bound to do, this would not be an issue. I know that we are not the only HOA facing delinquent HO's. The point of this post was to find out if there is a $$$ criteria for foreclosure that anyone in GA is aware of...just for our own info

The last communication from our attorneys to these HO:
1. reiterated that the HO's are part of the HOA thereby required to pay duly levied assessments as they come due
2. rejected the partial settlement offer and demands payment in full of $----
3. a lien is placed on the property and will not be removed until the monies owed are paid in full
4. If necessary the Association will pursue further legal actions allowed under governing documents and Georgia law to collect the debt
5. Any additional fees or costs incurred in the pursuit of this debt will be added to the HO's account and become their responsibility
6. forward payment to attorney's office by no later than October 14, 2009 to avoid additional legal actions and costs

Gloria

GloriaL (Georgia)
Posts: 195

Posted:

Quote:

In defense of our BOD, we have not "more than doubled the expense to the owner."
Our BOD advised the HO's before each legal action that they would be billed for expenses IF they did not pay their Dues. They chose NOT to pay. They could have stopped, and still can stop, expenses from escalating at any time by just paying what is due.

Therefore, the doubling of expenses owed falls back on these HO's. It was, and continues to be, THEIR choice not to pay that keeps this moving forward. It is their own choice at their own expense.

Gloria

JackieB (California)
Posts: 198

Posted:

why not go to small claims court, cheaper and more effective.

KirkW1 (Texas)
Posts: 1,665

Posted:

Going to court at this point is just folly. First, the attorney advised you to wait. The attorney further mentioned that a suit could cost the HOA all legal fees and would cost more then $1000. A judge just might make the same observation I did that the amount has more then doubled already and would be about 4 times the original by the time a suit is factored in.

Folks, the wise choice is to wait it out. Continue to charge interest and let it be for a bit.

You really do need to establish a policy and follow the policy. Don't factor in things like not liking the owner because they drag their feet, etc. You state what steps you take as they approach a given amount of time overdue. You take those steps and don't worry about things like researching if the owner really belongs or such.

MicheleD (Kentucky)
Posts: 4,491

Posted:

Quote:

Posted By KirkW1 on 10/05/2009 6:53 PM
You take those steps and don't worry about things like researching if the owner really belongs or such.

Kirk, in fairness, I believe the researching was done as an act of due diligence. The homeowner declared that they were not legally part of the association. It shouldn't have taken a lot of "research," however, but I believe it was the prudent thing to do.

One of our homeowners declared the same thing after being notified of various violations of the covenants.

He claimed he was only paying assessments to be "nice," but his claim that he was not part of the association and not subject to the covenants because his property was purchased and built out before the covenants existed. He claims at least 2 years before the developer created and filed the covenants or even the site plan for the development with our zoning board.

Now in our guts, we knew better. But -- what if he were correct? So we did the research. But because all the records for such things are available free online, it didn't really cost us much.

It turns out that he did not either purchase or build his house prior to the developer's filing of all the proper legal documents! In fact, he actually purchased his home a full 2 years after all the document filings for that section of the development occurred. Of course he was trying to bluff us out, but, good grief, he wasn't even close on his claims!

RickW (Illinois)
Posts: 169

Posted:

I don't pretend to know the laws, rules and fees in your state. I'm still learning those of my state! I do know I feel that the attorney our association had retained seems knowledgeable and fair on their fees.

Therefore, my first inclination is to inquire what the cost would be to research and determine in their eyes, if the homeowner is in fact a member of the association or not. This could be valubale information down the road.

My second inclination is to hold back on legal fees until the amount owed is closer in line with what the legal fees would be. I completely agree that the legal fees should be billed to the homeowner, however, if said legal fees are more than what is owed...I don't know if they would be awared to the association.

Sometimes, looking at the bigger picture is what a board of directors is forced to do.

Rick

JohnO6 (Georgia)
Posts: 424

Posted:

Quote:

Posted By GlenL on 10/03/2009 9:47 PM
Gloria, I can't find a trigger amount or a minimum time in the GA statutes to initiate a foreclosure: http://www.communityassociations.net/ga_poa_act.htm (section 44-3-232)

As Kirk posted you should a written collection policy which should spell out the step by step procedure that will be taken by the HOA to collect and it should be provided to every homeowner; CA requires it to be given annually. It's when you try to make it up as you go that you get into trouble. I posted a list of policies and procedures every HOA should have in place before they were needed and collection policy was number one. See: http://www.hoatalk.com/Forum/tabid/55/forumid/1/postid/81934/view/topic/Default.aspx

Glen - FYI, the GA Statutes you cited do NOT automatically apply to all HOAs in the state. In fact, most GA HOAs (which ARE non-profit corporations and subject to those relevant portions of the Georgia Code) are not subject to the POA Act. The HOA actually has to apply to the state to be covered by the POA Act.

GloriaL (Georgia)
Posts: 195

Posted:

Rick,
During the first year of delinquent Dues, the legal fees are almost equal to our Annual Dues, which are just $330. Does that mean that the BOD should not legally process delinquent Dues but wait until they accummulate to higher $$ numbers? How can we afford to do that? Each year with unpaid Dues by one HO, means less $$ to pay our bills forcing our Dues to be raised by the 5% allowed without a membership vote. Now everyone else is bearing the cost of the deliquent HO. Our total budget is just over $8,000 from which we pay landscaping, water, electric, insurance, reserve fund, and legal. There is not a whole lot of wiggle room.

John,
Last year our Community voted and we are now part of the GA POA, which should make some of this Dues collection a bit simpler. So far, not so much.

Glen,
I believe it is excellent advice to establish a written Rules policy for collection of deliquent Dues which should be distributed to all HO's so they are fully aware of the steps and legal fees for which they will be responsible.
I will bring it up at our next BOD Mtg. This is the first time that we are dealing with this, so it is new to us and our infant HOA.

So back to the original question of a $$ threshold for starting foreclosure procedings:
I do not find a specific dollar figure stipulated.
We will adhere to our attorney's advice and wait and see.

I find this website a great source of info, ideas and direction. It certainly leads to many viewpoints, all of which are valuable...some points are acted upon, some points are just considered, and some points are thrown out.

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