HOA Dues & BK

[J102]

I am the president of a HOA for a 10 unit condo complex in Washington State. We have 2 owners filing for BK. One is a partnership of 2 couples with one couple filing BK (always an investment property). The other is a former resident who moved out and rented out her unit months ago. Both are behind on their dues.

Our HOA manager was just about to file liens on owners with back dues (we have a few people behind) and got notice that the former resident was filing.

Our CC&R state the HOA can intercept the owed HOA dues from the renter. Can this be done when the owner filed BK? It is like the renter is getting free utilities, free use of the common washing machine, etc.

We are just in a hard spot with 2 BK in the building, other folks late on HOA dues, starting a lawsuit against the converting developer, and just got tagged by the city for an unsafe sidewalk in front of the building that will cost us $1,400 to fix (hoping the we can hit the developer with that one!)

I too am also considering filing because of my situation. I was a resident but am renting the place out and moved in with family. If my place isn't a money maker (I have to pay about $100 a month difference on the rent/mortgage plus the HOA dues) would I have to give it up? I also don't want to screw over the HOA.

[justbroke]

Our CC&R state the HOA can intercept the owed HOA dues from the renter. Can this be done when the owner filed BK? It is like the renter is getting free utilities, free use of the common washing machine, etc.

No, I don't believe that the HOA can do that because the property and all its receipts (rental receipts) are property of the Bankruptcy Estate. If you try to intercept any receipts, the Trustee will probably file for Sanctions. On the other side of the equation, if the tenant (owner) hasn't actually filed yet, why didn't you (the HOA) go secure a lien for the past due amounts? (That lien would need to be recorded before the person actual filed their petition.)

We are just in a hard spot with 2 BK in the building, other folks late on HOA dues, starting a lawsuit against the converting developer, and just got tagged by the city for an unsafe sidewalk in front of the building that will cost us $1,400 to fix (hoping the we can hit the developer with that one!)

Many HOAs are feeling this too.

I too am also considering filing because of my situation. I was a resident but am renting the place out and moved in with family. If my place isn't a money maker (I have to pay about $100 a month difference on the rent/mortgage plus the HOA dues) would I have to give it up? I also don't want to screw over the HOA.

This is the trend. HOAs are under pressue.

[DeadManCrawling]

This has been a constant subject on this forum lately.

One thing to remember, both for the HOA and the owner, is that the owner will continue to be responsible for the fees that accumulate after the BK is discharged, until the unit is deeded to the party foreclosing, if foreclosure is underway.

Some banks are delaying foreclosure proceedings to avoid these fees, leaving the HOA to go after the owner, which is difficult at best. Blood from a turnip and so on.

Good luck to all involved, this could get tricky.

[poorold]

comments welcome.

I live in Florida and I believe under Florida law, the HOA gets paid by the bank when the foreclosure is completed (if there are outstanding HOA dues). But I believe the law limits the bank's liability to 12 months HOA dues prior to the foreclosure sale.

Given I filed Chapter 7 yesterday and offically moved out of my home the day before yesterday...and...surrendered my home via the Staement of Intentions filed with my paperwork yesterday...and filed Suggestion of Bankruptcy with the Court regarding my foreclosure case and mailed Citi's attorney the Suggestion of Bankruptcy...

My planned defense should the HOA come after me (my combined association dues are over $500/MONTH!!!) is as follows:

1. As of yesterday when I filed, the unpaid 14 months' HOA dues are included in my filing.

2. Starting today and going forward till the foreclosure is finalized, the bank will have to pay the HOA dues for the 12 months preceding the foreclosure...so...the HOA will have a shortfall, but the shortfall will be for a period covered in my bankruptcy filing.

Therefore, the HOA will not be able to come after me for the period the bank does not pay.

If, and I view this as unlikely, the bank decides to pursue me for the HOA dues that accrue from today till the bank forecloses, my position would be that the bank actually harmed me by delaying the foreclosure and are not entitled to any HOA dues from me.

Sort of the same concept that a landlord cannot harm a tenant after a tenant moves out by letting a place remain empty because the landlord will just sue the tenant under the lease provision that says the tenant is liable for the rent until the place is re-rented.

Or, can I just tell them to bill the Trustee who, as of yesterday, has effective control of the home? LOL.

[justbroke]

I live in Florida and I believe under Florida law, the HOA gets paid by the bank when the foreclosure is completed (if there are outstanding HOA dues). But I believe the law limits the bank's liability to 12 months HOA dues prior to the foreclosure sale.

I'm in Florida as well. I have not found anywhere in the non-bankruptcy Florida Statutes (720) that states that the dues are on the Bank. I have researched this pretty well because I had surrendered my home and was worried about HOA dues.

2. Starting today and going forward till the foreclosure is finalized, the bank will have to pay the HOA dues for the 12 months preceding the foreclosure...so...the HOA will have a shortfall, but the shortfall will be for a period covered in my bankruptcy filing.

This is in direct conflict with the Bankruptcy Code (11 USC 523). Everything that happens post-petition (after you file), is your personal responsibility. It's actually not covered by the Bankruptcy.

Therefore, the HOA will not be able to come after me for the period the bank does not pay.

Oh, yes they can. And the Bankruptcy Code allows it because those dues are post-petition. Not only that, for post-petition dues, they can sue you in local Court and then garnish wages and accounts... if they want to be mean about it. The HOA wouldn't even need a relief from stay for these post-petition actions. However, most will wait until your case closes before taking any actions.

If, and I view this as unlikely, the bank decides to pursue me for the HOA dues that accrue from today till the bank forecloses, my position would be that the bank actually harmed me by delaying the foreclosure and are not entitled to any HOA dues from me.

Nothing in the law compels the Bank to foreclose. You'd have to prove that they were compelled to foreclose on the property and that they failed to meet some contractural or statutory requirement.

Sort of the same concept that a landlord cannot harm a tenant after a tenant moves out by letting a place remain empty because the landlord will just sue the tenant under the lease provision that says the tenant is liable for the rent until the place is re-rented.

Not the same thing. In the event of a landlord, that's called mitigation. The Bank doesn't have to mitigate their losses, because your HOA fees... are not "their" losses. The Bank doesn't come after you for the HOA dues, it will be the HOA itself. I think that the relevant parts are in Sec. 720 of the Florida statutes.

I will say this in your defense... it is more likely that the Bank will just pay the HOA assessments/dues. The HOA can not file a lien against the property because of the Bankruptcy. However, after the Bank has been recorded as the owner of the property, the HOA can pursue the Bank for dues from the date on the new deed.

Or, can I just tell them to bill the Trustee who, as of yesterday, has effective control of the home? LOL.

Won't work either. The Trustee will "abandon" the property from the Estate and wants nothing to do with it (if it's upside down and has no equity or very little equity). You are still the titled owner of the property... that is who owes the dues.

My theory is this. The HOA would be barred from placing a lien on the property after you file. That's why they can't collect (on the post-petition dues) by placing a lien on the property. (11 USC 362, aka the Automatic Stay, is what prevents them from doing this.) Any lien filed prior to filing, would be attached to the property, and sure, the Bank will pay it upon foreclosure (and being listed on the deed). Unless and until the HOA files a Relief from the Automatic Stay, and during that period prior to discharge and closing, the Bankruptcy code (11 USC 523) is pretty clear on who owes the dues.

Think of it this way... all post-petition debt is yours! If someone went into your home (after you file and prior to actual foreclosure) and gets injured... YOU, not the Bank, are liable. It's no different.

Well, at least that's my read.

[poorold]

thanks justbroke,

I think the Bank will just pay too, but apparently only $4,520 (1% the mortgage amount) under Section 720 3085(2)(c) of the Florida Statutes.

My home is already in foreclosure and I hope they lift the stay to proceed and get it done with.


Given the bk laws are designed to give you a fresh start and I have surrendered the home, what can I do to prove I am not benefitting from ownership and have offered the home up and therefore desire not to be liable for an accruing liability to the HOA?

does a quitclaim deed requires the grantee to accept it? i.e., can my wife and I just quitclaim our interest to the HOA or the mortgage company and have the quitclaim deed recorded without acknowledgement by the HOA or Citi?

[justbroke]

I think the Bank will just pay too, but apparently only $4,520 (1% the mortgage amount) under Section 720 3085(2)(c) of the Florida Statutes.

You forgot this part.

The limitations on first mortgagee liability provided by this paragraph apply only if the first mortgagee filed suit against the parcel owner and initially joined the association as a defendant in the mortgagee foreclosure action.

(Noting that all lis pendens that I've seen enjoin the association as a defendant.)


So just hope that the lis pendens shows the HOA as a defendant! Then you're good to go for 1% or 12 months, whichever is less ($4,520) I assume.

My home is already in foreclosure and I hope they lift the stay to proceed and get it done with.

I have an investment property, the Bank has been relieved from the Automatic Stay, and have not foreclosed yet. I filed last July. matter of fact, I just received a Notice of Deficiency asking me to cure some $30K+ by July 3rd or face... wait for it.... wait for it... foreclosure! It will be way over 1 year before they actually take this property!

Given the bk laws are designed to give you a fresh start and I have surrendered the home, what can I do to prove I am not benefitting from ownership and have offered the home up and therefore desire not to be liable for an accruing liability to the HOA?

But the start begins on the day you file. Not for anything that comes about after you file. You do benefit from ownership (especially under the generous Homestead in Florida). Say before they foreclose, the value quadruples and you have thousands upon thousands of dollars. I know... unlikely scenario.

But I fully understand your point and you make a compelling argument.

does a quitclaim deed requires the grantee to accept it? i.e., can my wife and I just quitclaim our interest to the HOA or the mortgage company and have the quitclaim deed recorded without acknowledgement by the HOA or Citi?

Interesting Strategy, but QC'ing it to the HOA does nothing because you don't have clean title. QC'ing it to the Bank.. would be an interesting argument.

I never noticed that 720.3085(2) because it's buried under some dumb "sample form". Good read though, and this will be helpful for other Floridians!

Maybe you could start a new thread and post that 720.3085 and the reasons why. I'm sure people will enjoy reading it.

[Doghouse]

Can anybody give an actual experience of what happened after their case was discharged and closed and home was foreclosed and they are done and out but still owed HOA dues?

My lawyer also said I am responsible for anything after I file but if not paying the HOA dues will delay foreclosure then I am going to continue to refrain from paying the HOA dues. My lender was just granted a relief from stay today and I am already 90 days after the Notice of Default was filed. I have not paid my HOA dues for 2 months now.

[relief13035]

I have no clue!
We surrendered (2) rentals. Haven't made a mortgage payment or HOA payment since Sept 08. We haven't even received a Notice of Default on the condos yet, but the Association has already filed a lien. Whooopie

[Scooter10]

[QUOTE=justbroke;281352]You forgot this part.

The limitations on first mortgagee liability provided by this paragraph apply only if the first mortgagee filed suit against the parcel owner and initially joined the association as a defendant in the mortgagee foreclosure action.

(Noting that all lis pendens that I've seen enjoin the association as a defendant.)


So just hope that the lis pendens shows the HOA as a defendant! Then you're good to go for 1% or 12 months, whichever is less ($4,520) I assume.


Bottom line - If first mortgage lis pending includes the HOA as a defendant then the HOA can not come after you for the fees (up to 1% or 12 months). Anything over that amount the HOA can come after you. I owe 1K in post BK charges on a house discharged in chpt 7 bk. I just received noticed that they are going to lien the property. Does this mean the HOA is "choosing" to lien the property and collect from the bank or can they still come after me?

[denisejohn65]

My lawter told me to keep paying the hoa fees or save for them. I'm paying them. I'm not paying mortgage. So does this mean I have to keep paying even after the discharge? So...I have to pay them until the bank takes the condo back??? Please help