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HOA fee liability after HOA foreclosure

Pembroke Pines, FL |

The HOA had foreclosed on the previous owner and got title, but later, the Bank foreclosed, and I bid & won the county foreclosure auction and got title.

1. There is a question whether the HOA lien is remedied or wiped out by the HOA's foreclosure. There is no general consensus about this issue, it seems. For instance, http://www.avvo.com/legal-answers/does-a-hoa-foreclosure-extinguish-the-hoa-lien--af-674952.html

2. Regardless of #1, from my understanding, when it took title, the HOA became responsible for all previous and current dues. Therefore, the HOA can not collect these dues from the subsequent owner (me), because they had a duty to make assessments current like any other buyer, and it would be unfair to treat themselves differently.

Is lien still valid? How to remove lien?

One attorney said I should pay the entire balance (HOA lien + hoa attorney fees + past/current fees), and this will remove lien. Another attorney is telling me we should file a "Quiet Title Action", and if the HOA responds, they won't have any defense to the amount due (for reasons listed above), and as a result I should get a clean title from the Quiet Title Action. Can and will this work? FIrst attorney will charge less (but I pay more), but second attorney is not guarnteeing outcome. So, now I am left in this situation where I don't know what to do. I thought the law is clear, but it's not clear enough to prevent me from paying a whole bunch one way or another. Would a title search/report show that this lien is still present and valid? Should I even have to do anything in this case? HOA sent me a ledger about the property showing it's 16k behind, but no formal demands, lis pedens, etc. Should I wait longer?

Attorney Answers 3

Posted

That's precisely why it's still called the "practice of law", sometimes problems may have more than one viable solution. Regardless of the way you decide to go, if you haven't already, I suggest obtaining an opinion of title to determine the validity and extent of liens. Remember, the gold standard is what will happen if you want to sell this property. If you can sell this property to a buyer who can obtain title insurance, then nothing else really matters.

The hiring of a lawyer is an important decision that should not be based solely upon advertisements. Before you decide, ask us to send you free written information about our qualifications and experience. The information contained on this website presents general information about our firm and is not provided as legal advice and should not be used as legal advice. Before acting on any of the materials presented on this website, you should consult with an attorney regarding your own unique situation. Using this website does not create an attorney-client relationship between the user and Law Offices of Stephen Orchard and you.

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2 comments

Asker

Posted

If I get a title opinion, isn't it just an opinion? Some title companies may infer this differently, and when it comes time to sell property, it depends on the interpretation of the title company who is insuring the title. Do you know of any services out there that can give me title insurance after their own title opinion?

Stephen P. Orchard

Stephen P. Orchard

Posted

You're right, it's an opinion. And you are right, the title company (more importantly, the underwriter) that ultimately insures the property determines what is covered. My thought was that an opinion of title should at least give you some idea of what a reputable, knowledgeable firm would expect to insure.

Posted

No attorney could possibly guarantee the outcome of your question. However, the fact that the HOA foreclosed and owned the property for some period of time DOES NOT wipe out the balance due. The balance travels with the interest in the unit, so is now your obligation. During the period when the association owned the property it was responsible to pay just like any other owner. While itt may also be the association's obligation to pay the arrears as well as yours, the association can, and will no doubt proceed to file a lien against you and then commence foreclosure of the lien. The statute is less than clear about whether the association's ownership of the property would prevent it from collecting against you, or prevent you from seeking recovery from the association. One thing you can be sure about is that you will be embarking on a major and expensive piece of litigation, which I am sure the association's attorney will take very seriously and fight you to the last appellate court that will hear it, since if the outcome is that the HOAs ownership of the property was to wipe out its ability to collect th balance from a subsequent owner, that would impair HOAs' ability to collect what is due in delinquent assessments on foreclosed units. That results in a major policy battle which they are virtually obligated to fight.

Please note that the above is not intended as legal advice, it is for educational purposes only. No attorney-client relationship is created or is intended to be created hereby. You should contact a local attorney to discuss and to obtain legal advice.

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4 comments

Asker

Posted

Attorney Golant, Thanks for the feedback. When a lien is filed, are they reviewed by a court to determine validity? I know the foreclosure suit probably is, but what about the lien, a lis pedens, and pending litigation actions. 1. I have not seen a case where the HOA reforecloses on its lien...sounds like this is what your implying may happen. If this is the case, can the HOA can simply keep reforeclosing on subsequent owners until its happy? 2. In these types of cases, what is the "typical" outcome? Is it usually negotiated? Have you ever experieced or heard of a case like this?

Margery Ellen Golant

Margery Ellen Golant

Posted

Liens are not reviewd by any court unless they become the subject of litigation. The same is true of lis pendens. Not sure what you mean avout pending litigation actions, but unless they are contested, there is minimal if any review even of the foreclosure cases. This is not a situation I would consider a reforeclosure. A reforeclosure is a new action that is filed to correct something that was done wrong in a prior action, such as omission of a defendant, or correction of a legal description. If there is a balance due on a unit that has passed to a new owner, and the new owner does not pay it, the association is able to record a new lien, giving that new owner notice it is proceeding with collection, and then to commence foreclosure against the new owner. And of curse, each time, the attorneys' fees and court costs get added, so the amount keeps going up. I have been contacted by people facing association foreclosure where the attorneys' fees are triple or more the amount of unpaid assessments. There is no "typical" outcome. The associations are normally very hard-nosed about these cases, and it is in many cases understandable why this is so. Unlike mortgages, where the original lenders cashed out at the very beginning and the current owners of the mortgages are bondholders in pension funds and other distant investors, assocation assessments represent each unit's share of the budget to keep the place running. When there is a default, the other unit owners have to absorb the shortfall, and cannot afford in many cases to do anything but insist on full payment. This is complicated by the fact that this entire prooblem is new to the associations - it used to be a rare event that an association actually had to foreclose, and that the mortgage was also in foreclosure and that there was no equity in the property that would result in collectibility as a result of the foreclosure sale. Furthermore, many of the law firms who represent associations are encouraging them to be aggressive, and there is considerable support in the State Legislature and in the courts for the associations' predicament. Associations boards are amateurs, so rely on the advice of counsel, not professional money managers like loan servicers, who pay no attention to the 'advice' of their foreclosure counsel. So, bottom line is that in many cases they will agree to a payment plan if it is not too long and results in their getting all of what they perceive as due, but other than that, they will fight. The only way to get them to negotiate with you is to have serious leverage. This can come in the form of a legal issue, such as a defective lien or possibly a lack of equal enforcement, which is the issue you describe, or a financial issue, such as being able to strip the lien / discharge the debt in a Chapter 11 or 13 bankruptcy. However, the issue of the associations giving themselves special treatment when they wind up owning these units is such a pervasive issue, that my sense is that they will refuse to agree to anything, since then they will be looking at these battles from every buyer in a situation similar to yours. Practically speaking, they do not have sufficient assets to absorb all those shortfalls.

Asker

Posted

Attorney Golant. I appreciate the very candid and thorough explanation. As a recommendation by Attorney Orchard, I obtained an opinion of title (and it wasn't cheap) on the property. This previous lien did not show up as a valid lien on the report, and it was commented that the HOA foreclosure was the remedy of the lien and all interest secured by it, just like the bank foreclosure was the remedy for their interest in the property. However, it appears I am still joint liable for any dues that were not part of the original lien. The report claims a clear title and marketable a title, unless another lien is filed for dues that are not collected after the original lien. There are numerous precedents listed as supporting this claim. This part is vague but I think they might be a list of court cases arriving at the same conclusion. It appears there is a push for legislation to remove joint liability of HOA when they foreclose and take title, but no legislation has been passed (yet).

Margery Ellen Golant

Margery Ellen Golant

Posted

The issue is not the recorded lien, it is created by FS720.308, which provides: When authorized by the governing documents, the association has a lien on each parcel to secure the payment of assessments and other amounts provided for by this section. Except as otherwise set forth in this section, the lien is effective from and shall relate back to the date on which the original declaration of the community was recorded. However, as to first mortgages of record, the lien is effective from and after recording of a claim of lien in the public records of the county in which the parcel is located. This subsection does not bestow upon any lien, mortgage, or certified judgment of record on July 1, 2008, including the lien for unpaid assessments created in this section, a priority that, by law, the lien, mortgage, or judgment did not have before July 1, 2008. And 2b says: (b) A parcel owner is jointly and severally liable with the previous parcel owner for all unpaid assessments that came due up to the time of transfer of title. This liability is without prejudice to any right the present parcel owner may have to recover any amounts paid by the present owner from the previous owner. The posts we make here are attempts to provide general information. As the disclaimer says, we are not giving legal advice and know nothing about the specific details of any posters' cases. Since you apparently have the benefit of legal advice, you should ask your attorney how these sections impact the title issues.

Posted

Florida Statutes, Chapter 718.116 Assessments; liability; lien and priority; interest; collection.—
This statute is from Chapter 718 dealing with Condo Assocations. We don't know if you bought a condo or a house. But whether a house or a condo, if these assesment/liens are not covered by the statute, it is probably covered by a declaration that was written by the developer's attorney way back when. These declarations go with the land and if you die 80 years from now and your grandson inherits it, he will be liable.

Basically, from what information I have from your question (so this answer is not guranteed) you are defnitely liable for future assessment/dues/fees from the HOA. I'm sure of that becasue you are now the owner. As far as past dues and fees, probably you, the bank, the hoa, AND the previous owner are ALL liable. Whoever owned the property, was supposed to pay the assessment/fees/dues. So your big issue it seems is that maybe they want you to pay ALL OF IT because the bank and hoa and previous owner did not pay for PAST dues. It could have been deliberate, it could have been accidental. The statute says joint and several liability for condo associations, which means EVERYONE is liable for the full amount. That does not mean if $5,000 is owed, then everyone pays $5,000 each, for a total of $20,000 rather it means the HOA can collect $5,000 from one person or $2,500 from 2 people or $1,250 from 4 people. But if you are paying the whole $5,000 then you have a cause of action and can sue the other people (bank, hoa, previous owner) who is liable. In the meantime, you have to pay current dues. You can choose not to pay past dues if you want, but the HOA attorneys will send you notices and sue you. You could pay the past assessments and sue to get them back. You can wait and defend or counter-sue IF YOU BELIEVE YOU ARE NOT LIABLE FOR THE FULL AMOUNT OR THER IS SOME OTHER DEFENSE that I'm not going to get into typing for the next 3 hours. HOA's can be very nasty and there are very few defenses if an HOA or Condo Association sues a unit owner. There are defenses, but not nearly as many as when a bank sues for foreclosure. This is a scenario I created based on what you wrote, so don't hold me to it. If you hired an attorney before you bought, they did not inform you. If you did not hire an attorney, you are learning.:-) Call if you like. If I am away from the phone. I will get back to you. Great question thank you.

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