Foreclosure

Can anyone tell me what happens when an Association has a lien on a unit and it goes into foreclosure? Renter in this particular unit has told us that the bank called her and told her to make her rent payments to them rather than the owner.

You are correct, the owner is delinquent with the monthly assessments and also is incurring fines for a violation. We have already liened him for these but we haven't updated the amounts for a few months now.

So are you saying that we can still get the delinquent assessments and fines even though it goes thru bankruptcy? Does the bank take care of these monies?

It is definately a foreclosure. How would the bank that is foreclosing get a clear title on the unit if we have a lien on it?

Another question. These are single family condo units. We are to sign our snow removal contract soon. Do we have to provide services to this unit while no one is paying on it?

Nancy,

Also remember that the renter has absolutely nothing to do with this situation. It doesn't matter who she is sending her rent to as far as the association is concerned.

In our area, many banks are holding off on the foreclosure and positioning for ridiculously priced short sales. This is generally good from an HOA financial point of view, as your lien is not dissolved unless there is an actual foreclosure. On a short sale, the title must be cleared, which means the liens get paid off vs. a foreclosure where they do not.

In our community, we have been fortunate that the banks have paid their dues, late fees, etc. from the time the foreclosure redemption period ended. Sometimes they pay it upfront, sometimes they pay it on sale, but it at least gets paid. If the homeowner is not going to pay, the quicker the short sale or foreclosure, the better it is for the HOA.

Nancy:

Check your HOA's Master Deed/Bylaws and your state's laws governing HOAs and/or Condos.

As I stated previously, our governing documents grant the HOA the authorities to require re-direct of rent until a unit is current AND to evict if they do not. Obviously this is a legal process, but likely does not require a lawyer. Our governing documents give us these authorities for our community in MI and are also specifically granted by the Michigan Condo Act. I can't speak to any other renters rights laws that a previous poster mentioned, only that the Michigan Condo Act is a pretty strong authority in our neck of the woods. Here are some of the statements. Check your state's rules for similar (4)(b) and (5) are the ones most applicable:

(4) If the association of co-owners determines that the tenant or nonco-owner occupant failed to comply with the conditions of the condominium documents, the association of co-owners shall take the following
action:
(a) The association of co-owners shall notify the co-owner by certified mail, advising of the alleged violation by the tenant. The co-owner shall have 15 days after receipt of the notice to investigate and correct
the alleged breach by the tenant or advise the association of co-owners that a violation has not occurred.
(b) If after 15 days the association of co-owners believes that the alleged breach is not cured or may be repeated, it may institute on its behalf or derivatively by the co-owners on behalf of the association of
co-owners, if it is under the control of the developer, an action for both eviction against the tenant or nonco-owner occupant and, simultaneously, for money damages against the co-owner and tenant or nonco-owner occupant for breach of the conditions of the condominium documents. The relief provided for in this section may be by summary proceeding. The association of co-owners may hold both the tenant and the co-owner liable for any damages to the general common elements caused by the co-owner or tenant in
connection with the condominium unit or condominium project.
(5) When a co-owner is in arrearage to the association of co-owners for assessments, the association of co-owners may give written notice of the arrearage to a tenant occupying a co-owner's condominium unit
under a lease or rental agreement, and the tenant, after receiving the notice, shall deduct from rental payments due the co-owner the arrearage and future assessments as they fall due and pay them to the association of
co-owners. The deduction does not constitute a breach of the rental agreement or lease by the tenant. If the tenant, after being notified, fails or refuses to remit rent otherwise due the co-owner to the association of co-owners, then the association of co-owners may do the following:
(a) Issue a statutory notice to quit for non-payment of rent to the tenant and shall have the right to enforce
that notice by summary proceeding.
(b) Initiate proceedings pursuant to subsection (4)(b).
History: 1978, Act 59, Eff. July 1, 1978;¾Am. 1982, Act 538, Imd. Eff. Jan. 17, 1983;¾

The bank might be using a similar provision they have in their mortgage paperwork ... don't know. If I were the renter, I would require it in writing and ask for verificaiton of the authority. They may actually be trying to bring the mortgage current and avoid the foreclosure process?? If the bank has already foreclosed/sherif's sale, the HOA lien is probably discharged and back money is lost, but you can start billing the bank moving forward.

In MI, my experience has been that the bank needs to notify the HOA of an impeding foreclosure and/or sherif sale date. Until we receive notification, we can proceed on with our association foreclosure. If you get to your "intent to foreclose" prior to the bank AND include the bank on your notification, they often pay off the lien prior to the HOA foreclosure to secure their own interest.

So, unless your HOA forecloses first or notifies first, you will likely lose all your back dues and legal fees to the date when the bank forecloses. Once the bank forecloses and the redemption period expires, they pay dues starting from the sherif's sale date forward -- at least that's been my experience. If your HOA is not going to foreclose and the owner is not going to pay, a bank-approved short sale prior to foreclosure would probably be your best outcome.

Here's a wild thought! The OP should contact the Association's attorney and find out what s/he recommends the Association do in this matter. While the Association should have among other things a collection policy and a rental policy allowing them to collect directly from a renter in the event of a delinquency they evidently do not have it and can't make it up now*.

* They should make both policies now its just a little late to apply in this instance.

Nancy,

If they are the legal owner of the property at this point, then I would say "yes they are". I've heard of some cases where the bank will make the assessment payments; but in most cases they will not. IMO, the BOD should definitely contact the bank and take it from there. It's doubtful you'll be able to collect the arrearages, but perhaps you can collect from the day the bank took over ownership.