Tuesday, April 29, 2008

HOA Issues - Very Important! (11/17/2007)

This message is regarding HOA dues and foreclosure. Over the past year I have had over one dozen of our clients have homes which were filed for foreclosure or actually foreclosed on by HOA’s because the dues were not paid. This is a tragic and avoidable situation, but if it happens it can cost you a tremendous amount of heartache and money. Please understand – they do not put a lien on the house, they foreclose on the house and you lose title!

1) Most important - know if the home is in an HOA and know if you paid dues in the last year
a. You should know if you are in an HOA by reviewing your closing documents from when you bought the house
b. If Prime Properties pays your HOA dues then check your statements from the December/January time frame

2) HOA dues are not paid from escrow, they are paid by you or by Prime Properties for you
a. We had one client who did not pay his HOA dues because he thought they were paid from escrow
i. The penalties and legal fees added up to over $5,000
ii. Even though he has recovered ownership he still has additional expenses including a lost tenant, vacancy and other expenses

3) If your home belongs to an HOA and you have not paid any dues in the last year you are at risk of foreclosure

4) If the HOA does not send a bill and it goes unpaid then the normal option for the HOA is foreclosure
a. The covenants usually say the bill is due and payable without demand, meaning you must pay it even if you never receive a bill

5) If the HOA sends the notice to the actual home in question then tenants normally throw the notices away

6) If the USPS knows you do not live there they will return to sender without the tenant even knowing what happened
a. When this happens the HOA may pay an attorney, at your expense to “track you”
b. If the HOA cannot find you to deliver the demand for payment they will foreclose on the house, take possession and evict your tenant

7) You have already given the right to foreclose to the HOA as part of the covenants you agreed to when you bought the house

8) Prime Properties pays all HOA dues in the December and January time frame, but we only pay dues for the bills we receive
a. If we do not receive a bill we do not pay the dues
b. If we are paying your dues, check your statement and if you do not see a payment by February 10 please call your property manager immediately

9) If the house goes to foreclosure you can generally recover during a cure period, but the attorney’s fees can be expensive

10) Here are some of the reasons we have seen why an HOA bill was not received:
a. The title company did not give the HOA your address or Prime’s address after closing
i. They just used the default address in their system which is the address of the physical property
b. The HOA received the correct information from the title company but did not use that information for their records (They just used the default address in their system which is the address of the physical property)
c. The HOA changed management companies and did not properly transfer all the records (They just used the default address in their system which is the address of the physical property)
d. The HOA management company changed computer systems and did not properly transfer all the records (They just used the default address in their system which is the address of the physical property)
e. You moved in the last year and your forwarding information from the USPS expired before the HOA sent out their annual bill
Address forwarding by the USPS is usually less than a year.
f. The tenant threw away the notices, went to the foreclosure and bought the house themselves
g. The tenant ignored the notice and threw them away
h. The tenant read the notice and then left the property fearing you were not paying your mortgage (All the tenant sees is “foreclosure”, they do not know why and assume the worst)


In order to avoid any of these problems please know and understand:
· Know if the property is in a required HOA
· Know when the dues are paid
· Know who is paying your dues
· Make a note on your calendar each year to insure this task is complete

1 comment:

Anonymous said...

I did a short sale on my home in 5/08. I just received a collection notice from my former HOA, which states that my annual dues are delinquent and they reserve the right to refer my account to a collection agency. I contacted the HOA, and told them I sold the home and provided escrow's name and telephone number. It appears that escrow is now stating that they were unaware of an HOA. In the meantime, what can I do? I am going to draft a letter to the HOA giving them the new owner's name and telephone number, but I am concerned that this will "drag on".