Written by attorney Richard Glenn Elie

Condo and HOA Fees and Dues in Post-Petition Proceedings. Chapter 7 and 13

There are an awful lot of people finding themselves in the post-petition conundrum. They filed a consumer bankruptcy and are being assessed, post-petition, for fees owed to their condominium or homeowner's associations. They get their discharge and then get sued for the fees they could not afford to pay.

Often lenders sit on their foreclosures waiting months sometimes even years to complete the foreclosure process in order to avoid paying these maintenance fees and assessments.

There are a number of pre-2005 cases that allow or disallow relief to debtors. This is a serious issue for many people who already have no means to support themselves and their families.


The 2005 Bankruptcy Abuse Prevention and Consumer Protection Act was enacted by Congress in order to curb certain abuses in the administration of the nation's bankruptcy courts.

Part of those reforms included adding a provision to the Bankruptcy Code that made post-petition Condominium and Homeowners Association assessments and fees non-dischargeable in a Chapter 7 bankruptcy case.

"§523. Exceptions to discharge

(a) A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt—

(16) 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..."

This should be a major consideration of any Chapter 7 or 13 debtor. That is that if you continue to occupy real property that is governed by CC&R's, a condo association or HOA, you have to heed to the prospects of owing fees for as long as you have title and/or occupancy post-petition.

This is, essentially, a trap for the unwary who are laboring under an impending foreclosure but the lender simply refuses to take the property back or sell it at a foreclosure sale.

Chapter 13 discharges are much broader than Chapter 7 discharges and under 11 USC 1328 they are based on their plain and ordinary meaning, mutually exclusive to the extent 523(a)(16) might be applied in a Chapter 13 plan but not necessarily a hardship discharge. But you don't get off that easily either.

California has a statute that governs HOA fees pursuant to Civil Code 5700 - 5740.

In esseence the entire statutory scheme is based upon Conditions Covenants and Restrictions that run with the land.


There is a hot debate going on around the country as to whether these are personal contractual obligations of the debtor or merely obligations that run with the land. Section 5720 limits a claim against a debtor to no more than $1800 in small claims court. Though the association may seek to file a new lawsuit each time delinquencies add up to $1800 that would be impractical. The intent and spirit of the act appears to limit relief to a lien and foreclosure of the owner's interest in the property, except to the extent that $1800 is owed.

In the case of In Re Foster, 435 B.R. 650 (9th Cir. BAP 2010), decided on state law grounds, the Bankruptcy Appellate Panel of the 9th Circuit court of Appeals applied Washington State law in concluding that neither pre-petition quasi-contractual obglitations nor the condominium or homeowners association documents controlled the outcome of the case. The court found that when there are CC&R's present, the debt runs with the land and is personal to the debtor so long as the debtor retains an actual or equitable interest in the real property.

"Accordingly, we hold that, as a matter of law, debtor's personal liability for HOA dues continues postpetition as long as he maintains his legal, equitable or possessory interest in the property and is unaffected by his discharge. In essence, the "running" covenant rule in this case boils down to one of "you stay, you pay" since debtor's confirmed plan indicates he will stay in his home by curing his prepetition default on his mortgage and maintain on-going payments through his confirmed Chapter 13 plan.

Finally, we observe that Congress' linking of the nondischargeable nature of HOA dues assessed after the order for relief with a debtor's continued interest in real property under § 523(a)(16) is consistent with the case law that holds the affirmative covenant to pay HOA dues is one that runs with the land. See Rosenfeld, 23 F.3d at 837-38 (noting that the debtor "must transfer title to the property, if necessary by a deed in lieu of foreclosure" in order to terminate liability for HOA assessments); Beeter, 173 B.R. at 122 (noting that debtor's liability for the assessments was an incident of ownership, and only termination of that ownership can bring an end to the ongoing liability)."

Foster at 662 after citing In re Rivera, 256 B.R. 828, 834 (Bankr. M.D.Fla.2000).

California's courts view common ownership arrangements such as condominimum and homeowners associations as a complex web of various relationships all based on CC&R's.

"The relationship between individual homeowners and the managing association of a common interest development is complex (Lamden v. La Jolla Shores Clubdominium Homeowners Assn. (1999) 21 Cal.4th 249, 266, 87 Cal.Rptr.2d 237, 980 P.2d 940), and their respective rights depend upon the nature of the particular dispute. Some years ago, in Duffey v. Superior Court (1992) 3 Cal.App.4th 425, 428-429, 4 Cal.Rptr.2d 334, the court observed that associations were sometimes treated as landlords (Frances T. v. Village Green Owners Assn. (1986) 42 Cal.3d 490, 499-501, 229 Cal.Rptr. 456, 723 P.2d 573 [association could be held liable for rape *897 and robbery of individual owner who was not allowed to install additional lighting at time of crime wave]), sometimes as "minigovernments" (Laguna Publishing Co. v. Golden Rain Foundation (1982) 131 Cal. App.3d 816, 844, 182 Cal.Rptr. 813 [gated community could not discriminate among give-away newspapers]), sometimes as businesses (O'Connor v. Village Green Owners Assn. (1983) 33 Cal.3d 790, 796, 191 Cal.Rptr. 320, 662 P.2d 427 [condominium project with age restrictions ... was `business' within the meaning of Unruh Civil Rights Act]), and sometimes as corporations (Beehan v. Lido Isle Community Assn. (1977) 70 Cal.App.3d 858, 865-867, 137 Cal.Rptr. 528 [board of directors' good faith refusal to take action against construction of house in arguable contravention of setback restrictions was protected by corporate business judgment rule]).

More recently, the Supreme Court has differentiated between (1) the situation where, for the sake of maximizing the value of the homeowner's investment, each individual owner has an economic interest in the proper management of the development as a whole, and the relationship between the owner and the association is analogous to that of a shareholder to a corporation, and (2) the situation where an individual owner who resides in the development has a personal, "not strictly economic," interest in the appropriate management of the development in a manner that will keep the property secure from risks of physical injury, in which sense the relationship is analogous to that between a tenant and landlord. (Lamden v. La Jolla Shores Clubdominium Homeowners Assn., supra, 21 Cal.4th at pp. 266-267, 87 Cal.Rptr.2d 237, 980 P.2d 940.)"

See James F. O'Toole Co., Inc. v. Association (2005) 23 Cal. Rptr. 3d 894.

Though occasionally cited until recently, Anthony v. Brea Glenbrook Club, 58 Cal. App. 3d 506 describes how common ownership schemes such as condos and HOA's and the obligations tha arise out of the operation of these complex relationships come to be.

"A covenant runs with the land when it is appurtenant to the estate granted and passes with it, "... so as to bind the assigns of the covenantor and to vest in the assigns of the covenantee, in the same manner as if they had personally entered into them." (Civ. Code, § 1460.) The only covenants that run with the land are those specified in or allowed by statute. (Civ. Code, § 1461.) "Every covenant contained in a grant of an estate in real property, which is made for the direct benefit of the property, or some part of it then in existence, runs with the land." (Civ. Code, § 1462.)

(1a) The primary characteristic of a covenant running with the land is that both liability upon it and enforceability of it pass with the transfer of the estate. The benefits or burdens pass by implication of law rather than under principles of contract. (2) However, if the promise is merely a "personal covenant" — one not fulfilling the requisites of a covenant running with the land — it is enforceable at law only against the original parties thereto. (Berryman v. Hotel Savoy Company, 160 Cal. 559, 573 [117 P. 677].)"

In a plain, short and sweet statement, if its a CC&R, "You stay you must pay."


The Bankruptcy Court, Southern District of California decided In Re Cohen, 122 B.R. 755 (Bankr. S.D. Cal. 1991) prior to the 2005 Code Amendments. There the court concluded that any potential pre-petition contract existing pre-petition is discharged, but the obligation runs with the land under CC&R's in either event. Spencer determined that its irrelevant because the Code Amendment eliminates that distinction and that based on Foster the distinction becomes irrelevant as well.

At this juncture the action to collect money on post-petition condominium or homeowners' association dues, at least in California is likely a personal debt but only to the extent that the bankruptcy debtor retains some form of title, right to possession or equity in the property after the petition filing date. Once its transferred its no longer a continuing obligation.

I also conclude that it is not a debt based on contract but simply an obligation based in equity to pay for what you receive in exchange for the use of the real property. But I also warn that CC&R's often contain attorney fee provisions which also run with the land and may be awarded pursuant to Civ. Code 1717. So keep an eye out for that provision as well, since it is likewise covered under Civ. Code 5720.

That said, the obligation is no longer based strictly on any contractual obligation which is likely discharged in a Chapter 7 case, but the obligation continues until the title to the property however held, is transferred to either the lender or a purchaser. So you will still owe it till the property is no longer yours.


Both Spencer and Foster agree on one point: Post-petition HOA and Condo fees are owed by the title holder. They are post-petition claims that will affect the Chapter 13 plan.


In some instances the property sits in limbo while the lender decides to foreclose or not. If the lender refuses a deed in lieu of foreclosure then you have the next issue.

Many people move about the country once they've lost their homes.

It comes to mind that many people are being sued in venues though they no longer live there. Sometimes these venues are far away from the courts where the real property are located. Even filing in the wrong county in the same state as the debtor can be construed as a violation of the Fair Debt Collection Practices Act if the action is filed by an attorney.

I point to 15 USC §1692i(a)(2)(b). This provision requires that the HOA or condo association sue the debtor in whatever district he or she resides unless the debt is based on a contract signed by the debtor, in which case it may be filed in the county where the contract is signed.

Subpart (2)(a) in the statute provides that a debtor may be sued in the district "where the contract was signed", however since the contract may have been discharged, that leaves only the CC&R's. If these run with the land, then it is a personal debt, not a contractual debt, though CC&R's are interpreted applying contract law.

The complicating factor is whether or not CC&R's or discharged contracts can still impose the burden of forcing a debtor to traverse the entire nation in some cases to attend court over a matter they could ill-afford to pay for to begin with. Simply put I believe it would defeat Congress's intent to reduce unnecessary expense and burdens to compel a debtor to travel in order to defend. See Martinez v. Albuquerque Collection Services, 867 F. Supp. 1495 (DNM 1994)(creditors agents and creditor held liable and vicariously liable for attorney's improper venue selection).

Pay close attention to the 1 year statute of limitations in the FDCPA. However, thankfully, many states have enacted their own laws which extend the limitations periods and grant even broader protections than the FDCPA such as the California Fair Debt Collection Practices Act.

Likewise if a condo association or HOA's attorney obtains a judgment in the wrong venue, it may be void for violating the FDCPA. The 1 year statute of limitations generally only applies to damages claims by debtors against bill collectors and sometimes creditors. See Martinez.

The Fair Debt Collection Practices Act applies to collection agencies, but attorneys are collection agents for their clients and so it is possible when faced with suit, that the action and judgment are void.


I can only conclude at this stage that if you are contemplating either a Chapter 7 or 13, you should consider divesting yourself of title to the real property in a Condo or HOA if you owe significant assessments and have no means to satisfy those claims.

Based on the cases and a review of it all, if you stay and continue to enjoy an ownership interest, you owe the post-petition fees even if you intend to surrender the property to the lender.

Its best to completely divest yourself of the property prior to filing a consumer bankruptcy, this way you avoid the strong if not imminent possibility of owing fees and dues to a condo association or HOA even after you obtain your discharge.

Likewise, avoid the possibility of being sued post-petition for those fees as well. You go into bankruptcy to gain a fresh start. Plan wisely.

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