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Do Your HOA Fees Stay With You – or Stay With Your Property? Do You Even Know?

December 14, 2011

Everyone that lives in a condo complex, or a housing complex with an HOA has dues – fees you agreed to pay when you purchased the property.  One of the many documents you signed was an agreement to pay these fees.  But what happens when you can’t, or won’t make those payments anymore?  Do you know?

This has become a strong topic with so many Short Sales and Foreclosures and with  lot of HOA’s that have lost their FHA certifications due to too many HOA deficiencies.  Years ago, an HOA could foreclose upon a property for non-payment of the HOA fees.  That is no longer allowed but the HOA’s still need compensation for the dues that were not paid.  Have you had a Special Assesment placed on you, or your property, from your HOA?  That is one way that an HOA tries to compensate themselves for the loss of these fees.  They will either raise the fees or will place a Special Assesment on all the homeowners.

But what happens to you if you do not pay these fees?  Half of all the homeowners, Short Sale Negotiating Teams,  Title Companies and Escrows polled are sure that the HOA fees follow the property, whereas the other half feel that it follows the homeowner.   Have you ever had a Collection placed in your credit report?  That follows you,  not your property.  Have you had a lien placed on you?  Now, that’s a different matter since some liens do stay on the property and some follow a person.  HOA’s can do either.  They can first place the amount due in Collections, which will show up on your credit report, and then can place a lien on you and on your property.  In fact, in one instance, a homeowner who lost his home to foreclosure months ago is being sued in Small Claims Court by his HOA since are trying to recoup whatever they can from him at this point.  An HOA lien is considered a Jr. Lien, and therefore gets put behind your first Mortgage lien, and then the 2nd, if you have one.  If the home is foreclosed upon, all liens can be wiped out, including this one, if it was placed on the property. 

I always advise my sellers to continue paying their HOA’s, even if they are going to have to Short Sell their homes as there is no definitive answer on this but would you want to be a buyer of a home that will need you to pay their deficient HOA dues too???  I don’t know any new buyer who has the extra funds to pay what could be up to $15,000 in some cases.  I also tell them this so that we don’t have to face this issue months down the line and find an escrow may not be able to close.  Aha, you also may not have thought of that, did you?  These deficient fees have to be paid by someone before any escrow can close.  Will your lender pay it – the sellers lender pay it, the lender who is already been asked to accept lower than they expected to get?  Do you think the sellers have the money to pay this off, or do you?

To try and get to the bottom of this, I also polled a few lawyers for their legal advise.  As with all their advise, the first words out of their mouths were “Do Not Advise, tell your sellers (or buyers) to get advice from their lawyers”.  I do not advise, I always tell sellers and buyers to get advice from their lawyers, but here was the general concensus on this one question:  Look in your CC&R’s – it will be right there.  There may be a category called “enforcement” or something along that line (I forgot to write that part down) and it will be specified in there how your HOA will deal with this issue.  It is up to each HOA to set their rules – will they go after the  homeowner or the property for the deficient HOA’s.  Whatever is in writing cannot be changed unless done legally and you will have been notified of these changes in your monthly minutes.  Each state is different in what they allow and each HOA is different – there is no standard in any of this.

So, when you feel that a Short Sale is what you need to do, think twice about not paying your HOA’s – it can come back to haunt you.

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