First Mortgage and HOA Lien

Started by JoshM • 9 replies • 2983 views

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JoshM (Illinois)
Posts: 1

Posted:

We have a home owner in Missouri who was behind a sizable amount in HOA fees going back the last three or so years. A few months back, we prepared a lien and filed it against his property. The bank foreclosed against the property and it was resold a few months after our lien was filed. I understand a mortgage may or may not wipe out the lien, can anybody offer clarity on this? The indenture creating the assessment was filed many years ago (well before the mortgage which was foreclosed) and the seller knew of our lien claim (which was recorded against the property). Can anybody provide any insight?

Thanks

MicheleD (Kentucky)
Posts: 4,491

Posted:

I have no clue regarding the laws in Illinois, but in Kentucky, any assessment lien is effectively wiped out (voided) in a foreclosure.

In fact, our controlling documents even say so.

It's POSSIBLE you MAY be able to go after the previous owner in small claims.

But that may end up costing more than you can probably get.

RobertR1 (South Carolina)
Posts: 5,164

Posted:

Josh,
If I understand right you filed a lien against a piece of property in your association (condo or HOA). Lien was registered at the courthouse and you have notification the owner was served the lien papers.

After this the Bank foreclosed on the property and the property was sold at foreclosure sale. Did you check the courthouse records to see that you have a lien listed against the property. If you have a lien on file you have a vested interest in the property and you should have received notification of the Banks petition to Foreclose and also the date of any sale. Did you all inquire at anytime during this period about your interest?
What does the courthouse records show now that the property is sold. Was there no disposition of your interest in the property?

You need to get the court records concerning disposition of the property. If you interest has not been disposed of, I would hire an attorney and find out why. If your interests have been considered at closing, there should be some notification or explanation.

LynetteB (Texas)
Posts: 141

Posted:

We have had two foreclosures and the bank paid only from the date of foreclosure forward. The lien was wiped out. We have spent $66 to file a claim in small claims court against the previous owner. They likely will not pay, but a judgement in our favor will lien their other property in the same county or we can force the sale of personally property. We have our first court date next month and I will let you know how it goes. We have two other small claims filed against out of state owners and we actually have more options against them than the one that lives here.
We could have just written off the unpaid amount. I have seen many posts that recommend writing it off. We chose not to because we fear more people will choose not to pay dues if they don't have to worry about a consequence. Folks that have their property paid off, or ones that have equity in their property are less likely to risk the possibility of foreclosure, but it is the others that you have to worry about. Sorry, I am getting off topic.

LynetteB (Texas)
Posts: 141

Posted:

We had a lien filed against a property that was foreclosed by the bank and we were never notified of the foreclosure. We only found out about it when the title sent us paperwork, which was well after the date it was sold back to the trustee on the courthouse steps.

MaryA1 (Arizona)
Posts: 7,043

Posted:

Lynette,

The real question is, is it worth spending $66 to go after a $100 delinquency that the owner may end up not paying even with a lien? Our attorney does an indepth credit report on the delinquency before suggesting the course of action. It's good to know what the delinquent member's credit history is; whether they've filed for bankruptcy; whether their bank is foreclosing, etc. before making the decision to write off the delinquency or not.

LynetteB (Texas)
Posts: 141

Posted:

Mary,
I agree, gotta do the research! It would be irresponsible, IMO, to spend money unless it was a substantial amount. Also, if they didn't have any other property to lien or nothing to auction, or as you mentioned if there was a bankruptcy involved. Case by case for sure.

RobertR1 (South Carolina)
Posts: 5,164

Posted:

LynetteB,
Google the words, "Reverse Foreclosure." This has attracted some interest in FL with one Judge ruling it is proper, so far.

DwightT (Idaho)
Posts: 664

Posted:

FWIW: When we took over from the developer, we discovered that we had one property owner who had never paid any dues. We followed our normal process for collections and got a small-claims judgment against the owner. Our attorney started the process to collect (including debtors exam and garnishment of wages), but the owner never showed up for the exam (resulting in a warrant for his arrest being issued), and then skipped town. The bank foreclosed, wiping out our lien, but we still had the judgment against the owner registered with the county clerk. We basically wrote it off to bad debt.

Nothing happened for a couple of years, then a couple of months ago our PM got a call from the former owner. Seems that when they tried to rent an apartment, the judgment popped up during the credit check and the landlord turned them down. Now they want to get the judgment cleared. All they have to do is come up with about $3K and we'll release it.

So don't give up completely. It may take a while, but you can eventually collect from some of the dead-beats.

MicheleD (Kentucky)
Posts: 4,491

Posted:

Wow! Dwight, that gives me hope.

We are only this year going to small claims with a handful of our most "persistent" delinquent owners.

I will print this out for our board meeting next week.

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