HOA Demand Letter

[nioka]

On March 4 I called my HOA and discussed a possible settlement. They declined to settle and insisted on the full assessment.
On March 10 I got an email from the HOA that stated that they would wait until March 31st for payment.
Today, March 12, I got a certified demand letter that gives me ten days to make payment arrangements. The letter goes on to say if the payment is not received within ten days a lien, fees, including foreclosure will be forthcoming.
I find it interesting that the person who sent me an email giving me to the 31st the following day sent me a certified letter demanding payment within ten days.
How is is possible to work with these people?

I have been waiting for the bank to begin foreclosure but I have heard nothing.

Should I contact the bank and inform them of the HOA Demand Letter?

(BTW, I would like to accelerate the foreclosure process).

[TXskyblue]

I don't know the answer to your question about whether or not you should call the bank, but I wonder if your next house is going to have a HOA.

[nioka]

TXskyblue,

I am sure you are joking but if I am ever able to buy again I will I assure you it will not have an HOA.
I only hope that others learn from my mistake.
While there may be some good HOAs how would one distinguish a good one from a bad one when buying a home?
IMO, it is best to avoid HOAs all together.

[justbroke]

I think that two things are happening. First, the HOA is required under law to demand payment before filing a claim of lien. This is usually a specific number of days and determined by your State's laws. Otherwise, the HOA can't file a Claim of Lien. Will the HOA actually file a claim of lien after a certain time period has elapsed? It's any one's guess! I know that my HOA has not filed a Claim of Lien in years... on any property. (It's a strong HOA with 21,000 residents and 30 "neighborhoods"; yes a very large HOA.) I tend to think that the smaller HOAs and certain small Condominium Associations (CAs) are tough to deal with because they can't absorb missing assessments as easily.

Okay, second, I think that you should do what you feel is necessary. If you contact your bank, the bank may decide to pay the past due HOA fees and may even accelerate foreclosure. There is, again, no way to tell the bank's reaction. Also, I believe these were post-petition assessments or fines? You could still be personally liable if they are post-petition assessments and/or fines. Anything that was pre-petition, and the costs associated with collecting pre-petition debt, is discharged.

In the end, you have a person that is trying to follow the book, so that the Community can assert their Claim of Lien immediately upon the expiration of the time to pay, while giving you a chance to pay. In the end, it is up to you how you want to deal with the HOA. I don't know everything about your particular HOA, but they sound like a smaller HOA that is not well managed.

[tobee43]

i think if i remember correctly, you have chase? they seem to be more interested in doing DILs nowadays. i would see if you could do that and just turn over the house. once that's done let the HOA file the lien, what happens here in florida is the new owners have to have clear title, which is not happening with many of these homes. the bank, and if it's chase remember i'm going on well over 5.5 years and they still are calling about us to a loan modification! we haven't lived there in over 6 years, you'd think they would get the point.

i agree with jb, the HOA must follow procedure or they may not be able to collect on the lien. a few months ago, we had a property management co., buy up two houses here. i made certain they didn't get any COs until they paid of those liens. NOT the old owners. i personally still think you should wait it out and let them move on the foreclosure so these dummies are buying up fl homes without clear titles....that's the time that an HOA moves on collections of the lien, or should. it's ok if you get the lien don't it will pass over with the house. as long as that's the way they do it.

sorry jb, i file liens all the time for the HOAs i work for, so, nioka's HOA may be wising up if they ever want to collect any money. it will still work out that the bank will get their money and then usually the HOA if there is anything left. that's why i still feel your home cannot sell in the legal sense without clear title.

you might find this of interest:

"What Powers Do Florida Foreclosure Laws Give HOA's?


In July, of 2013, Florida recorded more foreclosure activity than any other state in the nation, according to the real estate data firm RealtyTrac. Nine of the top 10 metropolitan areas with the highest rate of foreclosures were Florida cities. Florida has ranked number one in foreclosure-related activities for three consecutive months.

While many areas of the country have experienced a drop-off in foreclosures—initial filings, foreclosure auctions and bank owned properties, the state continues to sift through the backlog of foreclosure cases.

Most people know that mortgage lenders and local government can create liens that require foreclosure action, but many people don't know that condominium and homeowner's associations (HOAs) also can create liens that require them to avail themselves of foreclosure laws in Florida. HOAs have specific legal rights and powers over properties in the community.

This authority includes initiating the Florida foreclosure process for issues related to delinquent monthly fees, dues and special assessments.
What Happens When Assessments Become Delinquent?

Under Florida laws, when a property owner becomes delinquent on fees, a lien automatically becomes attached to the homeowner property as of the date the assessment became due. The HOA records a lien at the county recorders’ office, which provides a public notice that the lien exists. It may include:

Late charges
Penalties
Interest
Reasonable costs of collecting the debt-- attorneys’ fees and administrative costs

The lien puts a “cloud” the title to the property, which obstructs the homeowner’s ability to sell or refinance. The HOA has 90-days in which to file foreclosure action to enforce the line, but cannot file the paperwork until 45 days after the owner has been provided notice of the association’s intent to foreclose and collect the unpaid amount. Failure to file the lawsuit means the lien becomes void after 90-days.

Since Florida is a “judicial state,” the HOA must file a lawsuit to obtain a judgment from the court. The HOA can foreclose on the property and take title subject to the right of the first mortgagee.

The property will continue to have the encumbrance from the lien of the first mortgage. The HOA will have to take additional action to work with the lender to eliminate the mortgage on the property. However, the HOA can lease the unit at market value to recover the costs of the unpaid assessments.
Responsibility for Mortgage Payments

Once the HOA officially forecloses on its lien for unpaid assessments, the borrower remains responsible for making the mortgage payments. The first mortgage lien and any tax lien hold a superior position to the HOA’s lien. The HOA also takes on the responsibility for or taxes, utilities, insurance and maintenance. The HOA must secure the unit and ensure the systems are functioning properly
HOA's Can Speed up Foreclosure

Under a new law, a lien holder such as a homeowners’ association can request the court for an expedited foreclosure. This will give you less time to pursue the available options for keeping your home, including

1. Applying for a loan modification

2. Arranging another solution to avoid foreclosure, such as a short sale transaction or a deed in lieu of foreclosure

If you are having financial challenges and looking to find a solution to avoid foreclosure, you should move immediately to try and work out a solution for your overdue HOA assessments to prevent the acceleration of the foreclosure process.

Contact an experienced attorney who can help clarify what your option are for keeping your home. You may be eligible for a loan modification or other solutions. You must act quickly if you are already in Florida's foreclosure process. If you're not sure exactly where you stand in the foreclosure process, click below to download the Florida foreclosure timeline."

http://blog.amerihopealliance.com/bl...sure-laws-hoas

[tobee43]

but don't click that, if you go to the site, since they want your name and address....

[justbroke]

tobee, that is pretty specific for Florida and our poster is from Tennessee. In order to preserve position, in Florida, an HOA is still required to file a Claim of Lien. Even in Florida, whether the statutory lien has priority over a first mortgage, is deferred to the CC&Rs. Many Associations in Florida have had their "super" lien stripped in bankruptcy proceedings because they have subordinated their statutory lien priority in the CC&Rs. (Tennessee, by statute subordinates any first mortgage recorded prior to the delinquency date of any assessment.)

We are in agreement. I listed that the HOA is preserving their position. To do that, they must serve, at least under Florida law, a demand letter before filing a Claim of Lien. The HOA cannot foreclose without a Claim of Lien recorded with the Property Records for the county in which the property lies. The HOA is lining up the ducks, so to speak.

I was just posting that the HOA is doing two things. In almost all foreclosures, judicial and non-judicial and across all the States, a notice (or demand) must first be made before the foreclosure suit can be filed. I believe that the HOA is making the initial demand to conform with the law. The HOA also appears to be taking the second step as well. That is to file a Claim of Lien as the poster wrote in their email. HOAs in Florida must also do the same (record the claim of lien) in order to foreclose upon a property. This sets priority and puts others on notice. (I have litigated this type of case in the bankruptcy court.)

The investors do not care about cloudy title and they typically purchase the homes at an "HOA" foreclosure sale. At the sale, the purchase price is the past due amounts. These investors then take title, evict the former owners, and then rent the property until such time the bank forecloses on the mortgage. The former owners are still liable for the mortgage, unless they discharged the mortgage in a bankruptcy. I think the investors have one positive thing going for them, and it is that they pay the past due HOA assessments and fees (at the HOA foreclosure) and maintain the property while keeping up the assessments. It "could" be a win-win for the HOA if the banks are really slow to foreclose.

Otherwise, the HOA would be in the same position. That is, foreclose, take ownership, maintain and possibly rent to collect the past due assessments from the existing owners (or evict the former owners and get new tenants). Then, just as the investors, wait for the bank to foreclose upon the mortgage. I am sure that your board, tobee, struggles with these things, but I find the solutions interesting. Perhaps some of the investors make a little money through carve-outs or very slow "bank" foreclosures, but it is a very risky business. In the end, the HOA (and its board) need to determine how they want to deal with assessment issues and slow moving banks. Desperation may take hold in the end, but a good strategy for a "small" HOA may be to foreclose upon the lien more quickly. Certain compassionate cases may be warranted, but unless your HOA has a multi-million dollar reserve, everything is on the board.

I don't envy your position.

[nioka]

Justbroke,

I have yet to file so all assessments are prior at this point.
The HOA I am in has less than 10k owners and most are lots rather than homes. This HOA was fined a few years post for the sum of 2.5mil for illegal procedures and has a rep for being downright nasty.

I have been hoping for a foreclosure however I would prefer the bank forecloses. This is why I ask if I should notify the bank of the HOA Demand Letter.

Tobee43,

I don't think I would be eligible for a DIL as I have a second mortgage.

As to the house, it is slightly upside down with a small second mortgage. Prior to all this I had a Realtor look at the house and she said the house would not fetch the amount I needed to pay it off. I also asked about renting it and was told that for this area the house is too dated to rent.

My main concern is to get my name off the deed at this point. If I file chapter 7 I will pay the HOA fees going forward and I understand the the lien remains but is past on to the next buyer.

Is it beneficial to notify the bank of the actions of the HOA? In this case the HOA Demand Letter. Thanks.

[justbroke]

There is no way to tell if it would benefit you to forward the bill and demand for the HOA fees to the bank. The bank may just not care. We have no way to know down to a specific case how Chase or any other bank would respond given the situation.

If you were on better terms with the HOA, you could suggest that they foreclose or try a "reverse foreclosure". (Some HOAs have had sucess with reverse foreclosures here in Florida... but the HOA must have good attorneys.)

[Drazil65]

Hi, we ignored all the demand letters from our HOA (Ohio judicial state) in an effort to force someone to foreclose (rental property vacant at time and in another state). It was successful for us and the HOA proceeded with foreclosure. I actually called the HOA attorney on the demand letter and told them to proceed with foreclosure, they said they don't usually go forward with that BUT after the third call and request, they went ahead with it.

I also called BOA (mortgage holder) and told them to proceed with foreclosure as well (they never did but did show up at the auction to bid). In addition, found a third party investor that had purchased several homes in the area in the last couple years and emailed them to let them know that the home was going to auction once we had a date. The bank and the investor went up against each other and the investor got the property.

Keep in mind that this process although finally successful in the end, took 2.5 yrs total to get the property sold at auction from the first missed payment. Also keep in mind that our property and HOA were out of state so unless they were going to domesticate the judgement here in NC in order to be able to touch us personally (no garnishment here at time) I knew we were pretty safe as far as them touching things like our bank accounts (although we did move our money for a while).

Forcing the HOA hand worked for us in the end but it was a very long road. I would suggest doing as much research as possible on other cases in your area or with your HOA that have been successful or not to see how it was handled. I can tell you that if I had not unturned every stone I believe the home would still be sitting there as the bank would have not foreclosed any time soon. Good Luck with whatever you do.

[tobee43]

tobee, that is pretty specific for Florida and our poster is from Tennessee. In order to preserve position, in Florida, an HOA is still required to file a Claim of Lien. Even in Florida, whether the statutory lien has priority over a first mortgage, is deferred to the CC&Rs. Many Associations in Florida have had their "super" lien stripped in bankruptcy proceedings because they have subordinated their statutory lien priority in the CC&Rs. (Tennessee, by statute subordinates any first mortgage recorded prior to the delinquency date of any assessment.)

We are in agreement. I listed that the HOA is preserving their position. To do that, they must serve, at least under Florida law, a demand letter before filing a Claim of Lien. The HOA cannot foreclose without a Claim of Lien recorded with the Property Records for the county in which the property lies. The HOA is lining up the ducks, so to speak.

I was just posting that the HOA is doing two things. In almost all foreclosures, judicial and non-judicial and across all the States, a notice (or demand) must first be made before the foreclosure suit can be filed. I believe that the HOA is making the initial demand to conform with the law. The HOA also appears to be taking the second step as well. That is to file a Claim of Lien as the poster wrote in their email. HOAs in Florida must also do the same (record the claim of lien) in order to foreclose upon a property. This sets priority and puts others on notice. (I have litigated this type of case in the bankruptcy court.)

The investors do not care about cloudy title and they typically purchase the homes at an "HOA" foreclosure sale. At the sale, the purchase price is the past due amounts. These investors then take title, evict the former owners, and then rent the property until such time the bank forecloses on the mortgage. The former owners are still liable for the mortgage, unless they discharged the mortgage in a bankruptcy. I think the investors have one positive thing going for them, and it is that they pay the past due HOA assessments and fees (at the HOA foreclosure) and maintain the property while keeping up the assessments. It "could" be a win-win for the HOA if the banks are really slow to foreclose.

Otherwise, the HOA would be in the same position. That is, foreclose, take ownership, maintain and possibly rent to collect the past due assessments from the existing owners (or evict the former owners and get new tenants). Then, just as the investors, wait for the bank to foreclose upon the mortgage. I am sure that your board, tobee, struggles with these things, but I find the solutions interesting. Perhaps some of the investors make a little money through carve-outs or very slow "bank" foreclosures, but it is a very risky business. In the end, the HOA (and its board) need to determine how they want to deal with assessment issues and slow moving banks. Desperation may take hold in the end, but a good strategy for a "small" HOA may be to foreclose upon the lien more quickly. Certain compassionate cases may be warranted, but unless your HOA has a multi-million dollar reserve, everything is on the board.

I don't envy your position.

OH RIGHT! i keep thinking nioka's from florida. which means i am crazy. i did review TN a bit and they are what i see, have several if not more fundamental differences.

yes, i'm in the process of doing an DIL for a home in TX. there are two mortgages and the first lenders knows it. it depends on the situation. in this case the client is 98 yeas old, has good income but that money takes care of him in his nursing home. we have been trying to sell the house which not under water to no avail. so i'm working with the lender and they are saying there are exceptions to the rule, like age i suppose. they know we are going to hand them over a property worth about 5k with equity, but the poor client if he continues to pay for the up keep will wipe him out and leave him nothing for his care. this may be an exceptional circumstance, however, the lenders are now beginning to look at such situations and know they can sell that property and take care of any liens at a later date. now, it's still under "review", but they are saying it's looking pretty good.

also chase i would see if they may do an DIL as opposed to going through the foreclosure and keep waiting for them to come. explain you only have SS and pension and filing bk. it would not hurt to see what they say. you never know until you ask.

back to my error from FL to TN and reviewing some information. TN is in fact different than florida with a very different take. let me put the correct information in. interesting about the fact and there are a few states like this, tn is both juridical and non-judicial and NOT a super-lien state.

the ONLY states that have SUPER-LIENS are:

Alabama
Alaska
Arizona
Colorado
Connecticut
Florida
Massachusetts
Minnesota
Nevada
New Jersey
New York
Oregon
Pennsylvania
Rhode Island
Washington
Washington

according to NOLO this is what applies to tn. sorry about that!

Tennessee COA and HOA Lien Laws

The Tennessee Condominium Act of 2008 (Tenn. Code Ann. §§ 66-27-201 through 66-27-507) applies to all condominiums created after January 1, 2009, and the provisions discussed in this article also apply to condos created before this date with regard to events or circumstances that occur after this date.

An HOA’s governing documents, which include the Declaration of Covenants, Conditions, and Restrictions (CC&Rs) and bylaws, will usually contain specific information regarding assessments liens. (You should have received copies of the CC&Rs and bylaws when you purchased your property. Find out more about what's in your association’s CC&Rs and other relevant documents in Nolo’s article Before Buying: How to Read the CC&Rs or Homeowners' Association (HOA) Documents.)
How COA and HOA Liens Work

A COA or HOA typically has the power to place a lien on your property if you get behind in monthly dues and/or any special assessments (collectively referred to as assessments). Generally, once a homeowner defaults on the assessments, a lien will automatically attach to that homeowner's property.
COA Liens

In Tennessee, a COA is entitled to a lien for assessments or fines from the time they became due. If an assessment is payable in installments, the lien amount is equal to the full amount of the assessment from the time the first installment became due (Tenn. Code Ann. § 66-27-415(a)(1)(A)).

The recording of the COA’s governing documents constitutes record notice and perfection of the lien. The COA doesn't have to record the lien for assessments (Tenn. Code Ann. § 66-27-415(d)). (In some states, the association must record the lien.)
HOA Liens

If you are part of an HOA, check the CC&Rs to learn about the association’s right to place a lien on your home if you don’t pay the assessments.
Charges the COA or HOA May Include in the Lien

State law and the COA or HOA’s governing documents will usually set out the type of charges that may be included in the lien. In Tennessee, unless the declaration provides otherwise, a COA is permitted to include the following in its lien:

past due assessments
late charges
reasonable fines for violations of the declaration, bylaws, rules, and regulations (after giving the owner notice and an opportunity to be heard)
certain fees (for example, for the preparation and recordation of amendments to the declaration), and
interest (Tenn. Code Ann. § 66-27-415(a)(1)(D)).

To find out which charges a Tennessee HOA may include in its lien, check the association's governing documents.
Lien Priority

Lien priority determines what happens to other liens, mortgages, and lines of credit if your COA or HOA lien is foreclosed. (To learn more about lien priority and its importance in HOA foreclosures, see What happens to my mortgages if the HOA forecloses on its lien?)

In Tennessee, a COA lien is prior to all other liens, except for:

liens and encumbrances recorded before the COA records the condo declaration
real estate tax liens (and other governmental assessments or charges), and
a first mortgage or deed of trust on the condo that was recorded before the delinquency date of the assessment (Tenn. Code Ann. § 66-27-415(b)).

HOA CC&Rs often address lien priority, and typically state that HOA assessments and liens are subordinate to a first mortgage or deed of trust. To find out the priority of an HOA lien in Tennessee, check your CC&Rs and bylaws.
COA Super Liens

Under certain circumstances, a COA lien for delinquent assessments may have priority over a lender’s first mortgage or deed of trust. This is called a super lien. In Tennessee, six months worth of delinquent common expense assessments have super lien status (Tenn. Code Ann. § 66-27-415(b)(2)). (Learn more in Nolo’s article Homeowners’ Association Super Liens.)
Requesting a Statement of Unpaid Assessments from a COA

If you make a written request to the COA, the association must provide you with a statement of the amount of unpaid assessments within seven days after receiving the request (Tenn. Code Ann. § 66-27-415(h)).
COA and HOA Foreclosures in Tennessee

If you default on the assessments, the COA or HOA can foreclose. A common misconception is that the association cannot foreclose if you are current with your mortgage payments. However, the association’s right to foreclose has nothing to do with whether you are current on your mortgage payments. (Learn more about HOA liens and foreclosure.)
COA Foreclosures

In Tennessee, a COA lien may be foreclosed:

judicially (by filing a lawsuit) or
non-judicially (if permitted by the COA’s governing documents and so long as the COA gives proper notice of the foreclosure to the unit owner.) (Tenn. Code Ann. § 66-27-415(a)(1)). (Learn more about judicial v. nonjudicial foreclosures and general foreclosure laws and procedures in Tennessee.)

HOA Foreclosures

To find out about an HOA’s right to foreclose if you become delinquent in paying the assessments, read your CC&Rs and bylaws.
Statute of Limitations for COA Liens

A COA must start the foreclosure within six years after the full amount of the assessments becomes due otherwise the lien is extinguished (eliminated) (Tenn. Code Ann. § 66-27-415(e)). This is called the statute of limitations.
What to Do if You Are Facing Foreclosure by a COA or HOA in Tennessee

If you are facing a COA or HOA foreclosure, you should consult with an attorney licensed in Tennessee to discuss all legal options available in your particular circumstances. (See our HOA Foreclosure topic page for articles on HOAs, possible options to catch up if you are delinquent in payments, how bankruptcy can help discharge dues, HOA super liens, and more.)"

[nioka]

Thanks for the posts.

JB,

I guess it wouldn't hurt to keep the bank up to date on the HOA. My relations with the HOA is not so bad I cannot talk to them.

Drazil65,

2.5 years for you to get rid of the property is not music to my ears. I cannot imagine what you must of went through.

I have no concern on garnishment as my income is limited to SS and ERISA pension. One attorney advised me not to pay the HOA fees after I file chapter 7 as there is nothing the HOA can do but foreclose. (The only thing I don't like about that is that after I am discharged I want a clean slate and dragging around a bad debt to an HOA is not what I want to do. If I get stuck here after I file I will pay the HOA fees going forward).

When I look at a Zillow map of my area it is drizzled with foreclosures most of which are lots with about a dozen houses. I have no idea how to see who foreclosed on those houses, the bank or HOA.

Last Saturday I had a yard sale and I had one person came by and introduce himself as an investor. He seems very interested in the house.

I like your tactic of calling the HOA. I have a meeting with an attorney in a few weeks and I will run that by him.

I will call my bank today and inform them of the HOA Demand Letter. Thanks to all.

[justbroke]

tobbee, don't worry about the "wrong State" issue. I have done it many times myself. In general, the process is the same, but the super-priority status may be different, just as you point out.

I'm wondering if nioka could do something like Drazil65 and force one or both to begin the foreclosure process.

[nioka]

tobee43,

Our posts must have been posted at the same time. Anyway, thank you for all the info on Tennessee.

I have spoken to a few local attorneys and now have another appointment in the next few weeks.

Justbroke,

I think I may have a unique situation here where it makes little sense to foreclose on my home, however, there is now an investment concern present that may change how my property is valued on an investment basis. I think it is possible to motivate either the bank or the HOA to foreclose as Drazil65 has suggested and you mentioned.

My only other option would be to file chapter 7, pay the HOA fees going forward, and rent the property until it is foreclosed.
I wonder if real estate office that does rentals would consider a rental as such.

[nioka]

I called the mortgage company today. They were not interested in how I got into this situation. I told them of the HOA Demand Letter and they said they appreciated the heads up. The rep went on to say how complicated foreclosures are and that it could take months or years depending on the location. They did want to confirm I was still in the house. I assured them that under the advice of an attorney I am not leaving the property until my name is off the deed.

It will be interesting to see what happens next.