Home Sale Hindsight
Home Sale Hindsight
Q: We tragically lost our home in California to foreclosure in 2008, after doing everything we could to try to keep it. A check was given to us in exchange for the keys. Sometime later we received a lien for the back HOA dues owed. Is that legal?
If the bank takes back the home, does that mean that the HOA dues would be paid by the bank or negotiated with the buyer? --Laurence
A: Sorry to hear that you've had such a tough time, Laurence. First, let me explain one item of your letter that's somewhat unrelated to your actual question for the readers I know are wondering. Many banks offer foreclosed homeowners a move-out assistance payment known in the industry as "cash-for-keys" to leave the property in good condition when they vacate. It sounds like that's the check you received.
But onto your question -- unfortunately, your situation is quite common. Many foreclosed homes in developments managed by homeowners associations (HOAs) are months' or years' worth delinquent on their HOA dues at the time of the foreclosure.
Given that foreclosure takes six months or longer in most areas, the vast majority of owners facing foreclosure are very aware that it's coming. The vast majority of these people stop paying their property taxes and HOA dues when they realize that they're going to lose their home.
The type and extent of HOA collection efforts, which are legal, depends on the terms of any agreements that you signed when you bought the property, the laws of your state, and the factual scenario surrounding your home, especially after you lost it. Let me outline the landscape of this for you.
Virtually everywhere, HOAs are authorized under state law and the terms of the complex or subdivision's covenants, conditions and restrictions (CC&Rs) to place a lien on the property once your dues fall delinquent by a certain amount (usually a certain time period, like 90 days behind).
However, this lien is placed against the home itself, not your personal property, salary or bank account.
The HOA may require the lien to be removed before the title to the property can be transferred to a new buyer, which would mean either the bank or the next buyer would have to pay the lien off to close the deal (many banks do in fact pay these types of liens off when they resell a property after foreclosure).
However, you should be aware that it's totally in the bank's own discretion whether or when it tries to sell your former home. In some instances, the bank does not even attempt to resell the property for months or even years following a foreclosure.
And it may do nothing to pay off the delinquent dues until it absolutely has to -- which is when escrow closes on its resale of the home.
Under the terms of many HOA agreements and CC&Rs, the HOA may pursue a variety of traditional collection efforts -- including siccing a collection agency on you or taking you to court -- until the back dues are paid. The HOA doesn't care who pays them -- you, the bank or even the eventual buyer -- but it does have the right to take legal means to collect the money until someone pays.
Your next step should be to closely read the lien you received a copy of -- it is probably a lien against the home, not a levy against your personal property or bank accounts. Paying the lien off to clear the property is no longer your responsibility -- the bank will deal with that.
However, do be aware that the HOA can and may pursue you for the delinquency personally, if it chooses to do so before someone else pays it.
Tara-Nicholle Nelson is author of "The Savvy Woman's Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Tara is also the Consumer Ambassador and Educator for real estate listings search site Trulia.com. Ask her a real estate question online or visit her website, www.rethinkrealestate.com.
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