Can I Go After my Attorney for HOA Fees?

[Ynot]

Can I go after my attorney, in small claims, for HOA Fees that accrued after our BK filing?

After discharge (January 2010) we were not advised by our attorney that HOA fees would accrue and that we would be responsible for them. Instead we were told that we'd receive automatic stays, etc and for us to ignore them.

This past August, we began receiving complaints stating we were being sued for HOA fees. We contacted our attorney. He sent a letter explaining that this property that we owned in Florida was filed in the BK and discharged in Jan. 2010. He then explained, to us, that HOA fees would accrue and said that that's all he could do because he did not practice in Florida, so he basically wrote us off.

We now owe over $4k in fees.

Thanks for any help.

[bcohen]

Anyone can sue anyone for anything, but that doesn't mean you will win. In fact, unless you have a written document, or recorded conversation in which your attorney explicitly told you to ignore the HOA fees, I fail to see how you have a case.

Even if your attorney did give you such advice, it's not clear that you suffered money damages as a result of that advice, because you still would have had to pay the HOA fees, regardless. Also, if you were planning to surrender the house, there is nothing you can do to make the bank take the property back quicker (and thus stop HOA dues from accruing in your name). That is why smart people don't file BK until after foreclosure if they live in a HOA, and smarter people know to NEVER buy any property that's located in a HOA.

[despritfreya]

bc is right on the money in that response.

Des.

[justbroke]

Very solid response. The bankruptcy law is very clear on the HOA dues and the responsibility of the debtor after discharge. I wish you luck in trying to resolve this issue. HOAs are very aggressive in Florida (and Arizona!).

[Ynot]

Anyone can sue anyone for anything, but that doesn't mean you will win. In fact, unless you have a written document, or recorded conversation in which your attorney explicitly told you to ignore the HOA fees, I fail to see how you have a case.

Even if your attorney did give you such advice, it's not clear that you suffered money damages as a result of that advice, because you still would have had to pay the HOA fees, regardless. Also, if you were planning to surrender the house, there is nothing you can do to make the bank take the property back quicker (and thus stop HOA dues from accruing in your name). That is why smart people don't file BK until after foreclosure if they live in a HOA, and smarter people know to NEVER buy any property that's located in a HOA.

Cohen, please don't respond to any further posts of mine. I don't care for the sarcasm. As smart as you are I'm sure that you'll respect this request. Thank-you.

Can anyone, other than Cohen, please tell me where to find an HOA disclosure in my pile of paperwork?

Please understand that we don't have a problem paying and we'll make arrangements to do so. If we were never told or never signed anything stating that we knew, I can't see how we can be held liable. If we did and we've over-looked this I'll admit that. I just need to know where to find such a statement/agreement.

If the attorney knew that we were held liable for the HOA's, why would he have waisted more time and send a letter stating that this was included in the BK?

[justbroke]

Can anyone, other than Cohen, please tell me where to find an HOA disclosure in my pile of paperwork?

In your closing documents or in your legal services agreement? In your closing documents, it would be an HOA "Rider"... an attachment to the mortgage (or deed of trust).

Please understand that we don't have a problem paying and we'll make arrangements to do so. If we were never told or never signed anything stating that we knew, I can't see how we can be held liable. If we did and we've over-looked this I'll admit that. I just need to know where to find such a statement/agreement.

When you signed your closing documentation, there would have been an HOA Rider in the package. If you can find your original closing document package, it should include a copy of your Mortgage, Note, and any Riders and other disclosures. The HOA is a very specific Rider. Even had you not signed one, and your home is in an HOA, you are still subject to the Covenants of the HOA.

If the attorney knew that we were held liable for the HOA's, why would he have waisted more time and send a letter stating that this was included in the BK?

Actually, your HOA dues PRIOR to filing are actually included in the bankruptcy and are, in fact, discharged. Bankruptcy is really complex, if you ask me. Most people do not understand that a bankruptcy discharge only removes your liability to pay for things that you were indebted for, prior to filing. It does not actually remove the debt itself. It only bars the creditors from pursuing you personally for the debt by using process (such as suing) or dunning or attempting, in any way, to collect.

Just like your bank could, if you do not pay, an HOA can seek to foreclose upon the property. However, HOAs enjoy special rights in the Bankruptcy. In 11 USC 523 (a)(16) it reads that the discharge does not discahrge any debt which is "for a fee or assessment that becomes due and payable after the order for relief to a membership association with respect to the debtor’s interest in a unit that has condominium ownership, in a share of a cooperative corporation, or a lot in a homeowners association, for as long as the debtor or the trustee has a legal, equitable, or possessory ownership interest in such unit, such corporation, or such lot, but nothing in this paragraph shall except from discharge the debt of a debtor for a membership association fee or assessment for a period arising before entry of the order for relief in a pending or subsequent bankruptcy case". A bunch of mumbo jumbo that boils down to, you don't have to pay what happened prior to the bankruptcy filing, but anything after is your responsibility until title to the property changes.

What is the status of the property? Did you go through foreclosure? Did you decide to keep it?

Is it included in the bankruptcy? Yes. Everything up to the date you filed is included.

Do you need to pay HOA fees post bankruptcy? Yes. Unless you are in Florida where there is an exception, but that exception is limited to 12 months of HOA fees once a foreclosure actually takes place. (In Florida, the exception does not prevent the HOA from pursuing you personally. It only assigns that the lender is liable for up to 12 months of the HOA fees.)

Was your attorney correct? Yes. However, post petition fees are your responsibility until the title changes hands.

If I am going to "stay and pay" or otherwise stay in the property, do I need to pay the pre-petition HOA dues? Absolutely yes! The HOA still has the right, if the HOA dues are secured under State non-bankruptcy law, to pursue in rem (property) action against the property. That is, the HOA can foreclose to recover the dues. Most HOAs enjoy a super-priority lien on property that has HOA dues.

[HHM]

Even if your attorney did give you such advice, it's not clear that you suffered money damages as a result of that advice, because you still would have had to pay the HOA fees, regardless.

That is the real key. Malpractice claims against bankruptcy attorneys are practically non-existent because the debtor rarely suffers actual damage. In reality, a debtor's circumstances dictate what happens to them in BK (and after BK), the lawyer can help you navigate the BK, but the lawyer rarely affects the overall outcome (your circumstances do).

In this case, with the HOA, you would have had to pay anyway. At most, if you can actually prove your lawyer advised you not to pay the HOA, and that you "would have" paid had you been advised differently, you might be able to recover the late fees and collection charges, but the attorney would not be liable to pay, under any circumstances, the underlying HOA dues.

Unfortunately, the debtor usually lose this arguments because the problem is not so much that the attorney gave "wrong" advice, its just that the attorney doesn't fully explain and the debtor misunderstands the advice, that is not malpractice.

On the wider issue of liability for the HOA, trying to find a document is a red herring...after all, I presume you PAID the HOA fees as they came due at some point...that is all that is required (what people seem to forget, that even in law, and the law of contracts, is that "actions speak louder than words). It is hard to deny the existence of an agreement when both sides acted as if there was one, you paid HOA dues.

[Ynot]

Understood. Going after the atty, obviously won't happen.

What is the status of the property? Did you go through foreclosure? Did you decide to keep it?

It will be auctioned off on 25 March. We included it in the BK. We never lived there. It was an out of state investment. [/QUOTE]

How can we get the fees lowered, if at all possible? Who would we send a letter to? The judge? HOA? The atty's?

Thanks for your informative response. It really helped.

[HHM]

If the HOA fees are being collected by an attorney at this point, you would contact the attorney.

However, if the property is about to be sold, you may have nothing to worry about since the foreclosing lender will need to address the issue.

[Ynot]

However, if the property is about to be sold, you may have nothing to worry about since the foreclosing lender will need to address the issue.

Since a judge has already agreed with the HOA and ordered us to pay, are you saying that we still may be in the clear?

[HHM]

Ahh, if they already have a judgment, that is different.

At this point, contact the attorney and try to reach some sort of lump sum settlement.

The alternative would be to go consult with a real estate attorney that knows the ins and outs of HOA fee issues to get more clarity on the extent of your liability once a foreclosure occurs.

[Ynot]

HHM, thanks for all your help. We have someone we can ask a few Q's to, but he doesn't specialize in RE and we can't afford another atty. We'll probably draw up a letter, as we did to the debtors, prior to the BK, and negotiate a lower amount.

[justbroke]

Since a judge has already agreed with the HOA and ordered us to pay, are you saying that we still may be in the clear?

The judgment matters, but if the bank actually forecloses on March 25, the lender should be responsible for 12 months of the HOA dues (or 1% of the value whichever is less). See F.S. 718.116. I don't think 718.116 would protect you from attorney fees, but would cover the "common" and "regular periodic assessment" which accrued for the 12 months prior to acquisition (foreclosure).

Unless and until there is an actual foreclosure, this could be a problem since you would maintain title until such time. Additionally, if you are writing that there is a judgment, then that could affect 718.116, but I'm not an attorney and I don't know what would happen if you actually have a foreclosure sale on March 25. (The reason I'm not sure is because the paragraph 718.116 reads "unpaid assessment". If you paid them due to a judgment, then the assessments were paid. I don't see any way to recover the assessments. Sticky area though.)

(b)1. The liability of a first mortgagee or its successor or assignees who acquire title to a unit by foreclosure or by deed in lieu of foreclosure for the unpaid assessments that became due before the mortgagee’s acquisition of title is limited to the lesser of:
a. The unit’s unpaid common expenses and regular periodic assessments which accrued or came due during the 12 months immediately preceding the acquisition of title and for which payment in full has not been received by the association; or
b. One percent of the original mortgage debt. The provisions of this paragraph apply only if the first mortgagee joined the association as a defendant in the foreclosure action. Joinder of the association is not required if, on the date the complaint is filed, the association was dissolved or did not maintain an office or agent for service of process at a location which was known to or reasonably discoverable by the mortgagee.

[Ynot]

justbroke, thanks for the info. Would it be a good idea to hold off in paying anyone or contacting anyone until after the 25 March?

Or contact the attorney, that the HOA used, see if he can lower his fees and start paying those now. His fees aren't going anywhere either way.

[justbroke]

I can't provide legal advice, but you "might" think about talking to the HOA and informing them that the property is "scheduled" for foreclosure sale on March 25. Since they already have a judgment against you, I can't tell you how they will behave. The judgment may actually supersede any liability of the bank under Florida law. I just don't know.