Hardship - Unpaid Condo Fees

[austin3515]

Apparnetly in the bylaws to the condo association it says non-payment can result in a foreclosure on your property.

Has anyone approved a hardship based on a delinquent condo fee? They have the nasty collection letter from the condo associations attorneys threatening that foreclosure is one of the remedies they will pursue.

This is a first for me...

[Belgarath]

Me too, but I'd allow it if they state that eviction WILL occur. If it is just saying "one of the remedies we could pursue is eviction" then I don't think it rises to the required level. As an aside, I assume foreclosure isn't necessarily an option, as most likely the condo association isn't the lender?

[austin3515]

Personally I think you are inserting a threshold that is not in the regs.  If it "could be done" then by complying with their wishes you are "preventing foreclosure."  I personally don't think you have to wait until the very brink of disaster - you only have to be on the path to disaster.  But anyway, the regs are not crystal clear on what "prevention of foreclosure" really means.  So when there is flexibility I tend to give the benefit of the doubt to the participants. 

[RatherBeGolfing]

3 hours ago, Belgarath said:

As an aside, I assume foreclosure isn't necessarily an option, as most likely the condo association isn't the lender?

Most states allow HOAs to foreclose to recover unpaid fees even though they are not the lender.  The laws vary and I'm not sure how often it's used but its definately an option HOAs so I would assume the Condo Association could as well.

[Belgarath]

That's fascinating. So if I'm a bank, and I lend you 200,000 to buy a house, and you don't pay the HOA fees, the HOA can foreclose and my lien is subordinate to theirs? (I realize this is a non-qualified plan question - I just happen to live in a state where a very small percentage of the housing is in any sort of HOA, so this concept is alien to me).

[RatherBeGolfing]

HOAs have an obscene amount of power in some places.  We have tons of HOAs here and they are a pain. 

[austin3515]

So RBG, would you approve the request in my situation?

[RatherBeGolfing]

I think so.  If the notice says something like "if you don't pay we could do X, Y, Z, and Foreclosure", it is still preventing foreclosure.  I see @Belgarath point, but I think it is enough.  It is not enough to have a past due notice, but if they list the things they could do to collect, I think payment of the past due amount is the same as preventing them from doing any of the things they could do, including foreclosure.

 

[Belgarath]

You've convinced me.

[ESOP Guy]

2 hours ago, Belgarath said:

That's fascinating. So if I'm a bank, and I lend you 200,000 to buy a house, and you don't pay the HOA fees, the HOA can foreclose and my lien is subordinate to theirs? (I realize this is a non-qualified plan question - I just happen to live in a state where a very small percentage of the housing is in any sort of HOA, so this concept is alien to me).

I once lived in a townhouse that was part of an HOA.  If I remember the documents correctly they could foreclose to recover a fee.  

Having said that it is far from clear their claim is senior the secured lien holder's claim.  I think that would be one of the risks of going full nuke on the owner.  They property could be sold the bank gets paid and there isn't enough left to pay the HOA. 

[doombuggy]

As an HOA board member, I thought I would chime in my opinion...

is it possible that your participant has gotten to the point where the HOA has a lien on the home as that it might just be a step away from foreclosure?  When I joined our board in 2016, I knew we had a unit (we are townhouses) that owed money but I didn't realize how much until that meeting (they hadn't paid in 8 years, so it was considerable).  I think the home was about to be foreclosed upon and they probably had a notice of some type from the association's legal reps that stated that.  The owners were begging the board not to take their home. 

So I would think it would be justified (the h/s request) if your participant's case is like that.

The outcome - the board agreed to let them repay what they owed without interest.  They did within a couple of years and still live there today (I am not sure if that is good though...)

[david rigby]

Concern over whether the HOA lien is subordinate to a lender sounds irrelevant.  Not all such units have a mortgage.

[Lou S.]

Why wouldn't you approve. Aren't they threatening foreclosure if not paid? Wouldn't this satisfy avoiding eviction or foreclosure of principal residence?

[RatherBeGolfing]

1 hour ago, doombuggy said:

As an HOA board member, I thought I would chime in my opinion...

is it possible that your participant has gotten to the point where the HOA has a lien on the home as that it might just be a step away from foreclosure?  When I joined our board in 2016, I knew we had a unit (we are townhouses) that owed money but I didn't realize how much until that meeting (they hadn't paid in 8 years, so it was considerable).  I think the home was about to be foreclosed upon and they probably had a notice of some type from the association's legal reps that stated that.  The owners were begging the board not to take their home. 

So I would think it would be justified (the h/s request) if your participant's case is like that.

The outcome - the board agreed to let them repay what they owed without interest.  They did within a couple of years and still live there today (I am not sure if that is good though...)

It really depends on the HOA and the state.  Some states have pretty low minimums (dollars and days) on what can be owed and for how long before the HOA can attach a lien and forclose.  I think I have seen as low as 111 days past due and $1200-$1500.  In my state (Florida), HOAs are an absolute nuisance.  Many times they actual residents who are board members have little to no authority because they farm out the responsibility to a management firm.  If you think your neighbors can be petty, wait until you run into a managed HOA.  They rack up fees/fines very quickly and they usually have access to the HOA funds to defend against claims/suits.  We have law firms here that specialize in defending residents against HOAs and suing HOAs when they overstep their authority.

[BG5150]

Naive questions here:  can HOAs be baked into the mortgage payment similar to property taxes and/or h/o insurance?

[ESOP Guy]

2 hours ago, BG5150 said:

Naive questions here:  can HOAs be baked into the mortgage payment similar to property taxes and/or h/o insurance?

My daughter owns a property that has an HOA to mostly take care of the common grounds.   It isn't in her mortgage payment but she did set up auto payment from her checking account.  

That is the closest thing I have ever seen to what you are talking about but my sample size is 1 person. 

[hr for me]

Our HOA does allow for us to put a lien on a home (and we have) and we can take them to foreclosure (but luckily they and the bank got wise).   Sometimes what can happen is the bank holding the mortgage will pay the lien and then charge it back to the mortgage (I am assuming through escrow accounting?)

But yes, I'd approve this.  But then again our annual HOA fee is $300 in total....