Beware of Homeowner's Associations (HOA's)

HOMEOWNERS BEWARE!

While you home's equity is exempt and you are paying the mortgage timely you need to be sure you are current with the Homeowner's Association. The Homeowner's Association (HOA) is actually more dangerous than the mortgage company. Most HOA's are reasonable and try to preserve property values and can be dealt with in a controversy. Some others are pure EVIL.

Getting in to a peeing match with the HOA is a losing proposition. They are on the deed to your home in the restrictions and covenants section of your deed. All this took place at the closing. You may want to review those closing documents to see what your HOA rules/restrictions are because they could actually enforce them.

The HOA has great power, depending on the restrictions and covenants you signed, they can impose fines. Also they can use the fines or the delinquent HOA dues to put a lien on your home.

A HOA lien can kill a sale, a refinance, a short sale or can result in you losing the home. Title Companies will not issue a clean title until the HOA dues are paid and satisfied and satisfaction is recorded in the county records.

You can ignore the HOA lien but BEWARE, the HOA can foreclose and kick you out of your own home even if the mortgage is current!

One of the saddest calls I had to take was this woman who lost her home to a HOA foreclosure. The HOA dues were about $4,000. She hired a bankruptcy attorney to file a Chapter 13 to pay the HOA arrears- she decided NOT to pay the bankruptcy attorney at the advice of a friend (I am amazed how many "friends, family and relatives" know SOOOOO much more about bankruptcy than a bankruptcy attorney does). The sale was held and the eviction notice was served, she had to leave the house. WORST of all was the house was worth over $300k and had a mortgage of about $160k, SHE LOST $140k of equity. I have never heard such wailing, but she brought it on herself. The HOA did well, sold the house at a profit.

You do not cease to pay the HOA because of trivia like, the paint on the retaining wall, the fact they are fining you because you have a white BBQ grill cover instead of black, or that your home was not painted a color on the approved color pallet or your dog has plumped up beyond the 30 pound limit or they feel your lawn is sub par or you have dead plants or your boat or RV is in the driveway to name but a few "justifications" I have heard over the years.

Yes, America is free, but with an HOA, your neighborhood may not be free. I have had people say "IT IS THE PRINCIPAL OF MATTER" When you hear that, what you are hearing is someone about to screw themselves. If the HOA really bothers you either move or get on the board and change it.

If seeking to purchase a home go the county clerk of court and put in the HOA in the party name section to see how litigious the HOA is or better yet do not purchase a home with a mandatory HOA.

Your little $600.00 HOA fee delinquency can blossom to $3,000.00 very quickly once the HOA hire a law firm. Every time you call or send a letter, the law firm will bill the HOA (ultimately you). WORSE yet, anything you owe the HOA will be calculated at 18% pursuant to Florida Statute.

NIGHT OF THE LIVING DEAD HOA

The HOA obligation is as hard to kill as a vampire/zombie/werewolf etc. Just because you surrender the house in a bankruptcy or walk away from the house/move away, your obligation to the HOA has not died. YOU OWE the HOA for as long as your name is on the deed to the house! If you surrender the house in bankruptcy and owe the HOA at the file date (say Aug 15, 2014) you are discharged for all HOA dues from Aug 15, 2014 back, BUT YOU ARE RESPONSIBLE for the dues Aug 16, 2014 until the house is foreclosed, short sold or quitclaimed to the HOA.

While most HOAs do not take this extreme approach, they can. The worst case I recall is I had a client that filed in 2009 and surrendered the condo and moved out due to mold. In 2013 the condo association returned and demanded over $14,000.00 in post bankruptcy association dues! My client almost had to file a Chapter 13 to solve this, but he got a good attorney and settled out.

At this point a Chapter 13 bankruptcy can shield you for the post filing HOA dues. There is talk of conflicting case law and this could change. When leaving a house, might as well rent it to someone who will at the very least cut the grass, keep the pool not so green and pay the HOA. If you are blessed the Chapter 7 Trustee may have an investor who will buy the house from the Trustee on a Trustee Deed.

YOUR TAX DOLLARS AT WORK

The HOA is not the only authority that can affect your ownership discretionary choices. The County and Municipality has employees in Code Enforcement and Zoning that drive through neighborhoods seeking violations. Most often they write a warning, you comply it goes away. If the nonconforming situation has not been fixed, it is possible they can fine you, sometimes $100.00 a day, BUT unlike the HOA this will go against the property and the County/City will put on a lien and eventually foreclose. If you have filed bankruptcy, there is case law my office will send explaining the county/City's rights against the property and not the debtor.

An empty house invites problems and liability. Most mortgage companies have insurance for liability. If there is not insurance you may want to contact your insurance agent for an umbrella policy for liability. I have had clients end up with empty houses stripped of A/C units, copper pipes, cabinetry, plumbing, fans, counter tops and etc. See if you can get someone to stay in the house (gives them a place to live, protects the house, protects the mortgage company's asset and helps the neighbors/neighborhood.)

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