Condo HOA problem and what to do

[JAB1950]

Sounds to me like you are most worried about the aging infrastructure of your building and the possible costs arising from needed maintenance. Does your board maintain reserves for the various items encompassing infrastructure? If so your fears may be unfounded. If not, run, don't walk away from this situation

 

[ychuck46]

Avoid HOAs

Do you how many HOA organizations have lost lawsuits brought against them in the past? Absolutely zero. It is why I avoid anything that has an HOA or anything similar associated with it. They seem to appeal to the Nazis who want to tell everyone else what to do, so they get into positions of power in the HOA. Sell and walk away.

 

[Doc0]

The board realizes the value of your property and wishes to acquire it at a song. If you want to keep it you should create a self insurance fund capable of paying in full at any time and then just contribute monthly plus a little to the fund. If they pull the trigger you pull the cash. I had a couple units in a beach condo. The rent was paid by leasing the property out through the year except when you wanted to use it. The condo company closed the place for "renovations" for a year and all the dentists up in Indiana wound up forfeiting. The place exists today as beach resort with weekly or monthly rental but no ownership.

 

[MichaelL]

Wow! Maybe he got more backlash for his actions than he was willing to deal with. Sounds like a positive for all living there!

I think that the manager talked with the other board members and they asked him to step down. I heard that other people are happy and someone better will fill the vacancy.

 

[Global Wizzo]

I’m on a HOA board. The answer is to gather enough proxies and force a replacement of the board.

It sounds like they may have let the operating accounts get too low and not fully funded reserves. They may be trying to cover bad cash management with threats.

Nothing should be an issue until after 30 days overdue at a minimum. Historically bad accounts are another issue.

 

[ncbill]

Not sure what bubble you're talking about but we are now well aware of the risks when a first mortgage holder forecloses. That's why it's not necessarily in the HOA's interest to place a lien and wait for foreclosure because as happened to us in the previous case, it took a long time for foreclosure to take place and meanwhile delinquent dues continued to accrue. Better in that case to force foreclosure and cut our losses. In the current case, if we foreclose, we will add the legal fees to the amount owed us.

Whether you wait or not, forcing a foreclosure means the first mortgage holder gets whatever equity there is, if any.

Forcing foreclosure on a flip before the property is rehabbed & ready to list will get you the same result...or is it just a negotiating tactic?

 

[Stormy Kromer]

To the OP, get the he!! out of there. Life is too short.

 

[Ian S]

Whether you wait or not, forcing a foreclosure means the first mortgage holder gets whatever equity there is, if any.

Forcing foreclosure on a flip before the property is rehabbed & ready to list will get you the same result...or is it just a negotiating tactic?

If you force the foreclosure, then the lender who takes possession becomes responsible for the HOA dues and assessments going forward.

 

[CaliKid]

If you force the foreclosure, then the lender who takes possession becomes responsible for the HOA dues and assessments going forward.

I am not sure if that's true. Did the mortgage company agree to the HOA rules? Were they notified of changes? I think the mortgage is a priority lien to the HOA so I am not sure if they would be liable for HOA dues. I really don't know. Just thinking out loud.

 

[CaliKid]

To the OP, get the he!! out of there. Life is too short.

I agree with this. The HOA prez seems like a psycho. I'd move.

 

[ncbill]

If you force the foreclosure, then the lender who takes possession becomes responsible for the HOA dues and assessments going forward.

Unless there's sufficient equity to satisfy both the first mortgage & the HOA lien forcing foreclosure means the holder of the first mortgage gets whatever equity there is and any junior claims (like a HOA lien) get discharged.

If the lender takes back the property via foreclosure then they are responsible for HOA dues going forward.

But during the darkest days of the housing crisis a number of lenders who had taken back properties simply stopped paying the HOA fees, because, after all, what equity is there to collect from when the bank has taken back a property with a $350,000 mortgage (plus legal fees incurred) that now would only sell for $250,000?

 

[Brat]

Keep in mind the fact that the condo in question is within commuting distance of major high tech firms. The value of condos in SV environs has escalated.

 

[Texas Proud]

I am not sure if that's true. Did the mortgage company agree to the HOA rules? Were they notified of changes? I think the mortgage is a priority lien to the HOA so I am not sure if they would be liable for HOA dues. I really don't know. Just thinking out loud.

They are responsible for all expenses of the property, including HOA dues..


Not sure if they are responsible for past dues or not...

 

[Texas Proud]

Unless there's sufficient equity to satisfy both the first mortgage & the HOA lien forcing foreclosure means the holder of the first mortgage gets whatever equity there is and any junior claims (like a HOA lien) get discharged.

If the lender takes back the property via foreclosure then they are responsible for HOA dues going forward.

But during the darkest days of the housing crisis a number of lenders who had taken back properties simply stopped paying the HOA fees, because, after all, what equity is there to collect from when the bank has taken back a property with a $350,000 mortgage (plus legal fees incurred) that now would only sell for $250,000?

Just throwing out a question here... after it is taken by the bank, if they stop paying HOA dues why can it not be foreclosed on again? IOW, the original mortgage is now gone so the bank has the full $250K equity in your example...

 

[pb4uski]

I am not sure if that's true. Did the mortgage company agree to the HOA rules? Were they notified of changes? I think the mortgage is a priority lien to the HOA so I am not sure if they would be liable for HOA dues. I really don't know. Just thinking out loud.

I think that they are. DD was looking to buy a REO condo a few years ago. The bank had not been paying HOA but the arrearages were to be settled from the proceeds at closing. The deal fell through for different reasons, but the HOA would eventually have been made whole.

 

[LARS]

I knew that HOAs could be a problem and now I have a big one. I own a condo in Alexandria, VA where my girlfriend lives and I go to visit. It's a vacation home for me but it could be a good rental. It's an area that is appreciating so I have wanted to keep it as an investment.

However I just got a big shock when they sent me the new collection policy that the board approved. The biggest part of the problem is that this new policy applies to special assessments beyond the usual monthly fee.

It says that if you are 5 days late paying the HOA fee (including any related fees or special assessments) a 10% penalty will be added. If not paid in 30 days a notice goes out which says that within 15 days it will go to the lawyer for handling. They will then demand that you pay all of your monthly fees for the rest of the year and they will remove you as a member so that you can't use the facilities like the pool and gym. The monthly HOA is $700 so this would be a lot of money if it happened in early in the year.

Once two payments are behind the legal council is authorized to place a lien and start a non-judicial foreclosure on the property. The payment due will be settled in the order of attorney's fees and courts costs, late fees, maintenance assessments, special assessments and then the usual HOA payment owned.

I have the money to cover this and don't expect to be late, but imagine that you are working for the government and your pay check is late or you are a retiree and you SS check is late due to the shutdown or something beyond your control. Your situation will spiral out of control in no time.

What's worse is that this building is a high rise from 1982. It's possible that they could make special assessments for infrastructure that could be in the thousands. I'm going to have to look over the budget carefully for this reason.

I would not buy the place under this new policy. I'm temped to sell now but I don't have enough equity to cover all of the costs and I'd take a loss over what I paid. I had equity but sold the one bedroom and bought a two bedroom so that we'd be more comfortable as my girlfriend likes living there and I like visiting. I don't have a mortgage so at least that's not an issue.

What's really concerning is that the president of the HOA is a really nasty guy who sits in his condo monitoring the security cameras and then runs down and confronts tenants who he thinks are breaking the rules, like taking too big of a package up the elevator without a special reservation or some such trivial thing. I had a number of confrontations with him and he's a most disagreeable bullying type of person.

I guess this is a warning that you have to be wary of HOAs. I'm not sure how I would have found all of this out before buying.

Sounds to me like you have a lot of dead beat owners and so the Board took some drastic steps to curb abuses.

 

[ncbill]

Just throwing out a question here... after it is taken by the bank, if they stop paying HOA dues why can it not be foreclosed on again? IOW, the original mortgage is now gone so the bank has the full $250K equity in your example...

Here's how the lenders avoided paying HOA fees in my state & others:

"One tactic we saw frequently was when a lender would do everything necessary to complete its foreclosure except for the very final step—the recording of the deed transferring title back to the lender. The lender would then list the property for sale even though it didn’t technically own the home.

The deed to the lender would not be recorded until immediately before the closing on the sale of the home to a new owner. By not recording the deed to the lender until the last possible minute, a lender could avoid having to pay HOA assessments and the HOA had no avenue to recover those funds. The debt simply had to be written off."

https://www.charlotteobserver.com/living/home-garden/michael-hunter/article18506261.html

As the article notes, however, my state (& others) did change laws so the HOA could collect dues.

 

[Texas Proud]

Here's how the lenders avoided paying HOA fees in my state & others:

"One tactic we saw frequently was when a lender would do everything necessary to complete its foreclosure except for the very final step—the recording of the deed transferring title back to the lender. The lender would then list the property for sale even though it didn’t technically own the home.

The deed to the lender would not be recorded until immediately before the closing on the sale of the home to a new owner. By not recording the deed to the lender until the last possible minute, a lender could avoid having to pay HOA assessments and the HOA had no avenue to recover those funds. The debt simply had to be written off."

https://www.charlotteobserver.com/living/home-garden/michael-hunter/article18506261.html

As the article notes, however, my state (& others) did change laws so the HOA could collect dues.

Something interesting... it is not a requirement to record ownership to have ownership...



When I was working for mega there was a building that it wanted to buy... it was part of a shopping mall, the building being stand alone on the edge... well, it turned out that if they recorded the sale then mega would lose out on grandfather clauses for many thing including a water retention pond... IOW, mega would have to buy more land and build one... it would be over $1 mill to get up to the new standards...


SOOO, mega and the seller signed a contract that mega would pay the mall everything that would be due from that piece of the property and they would not record the sale... when I got involved it was because the 20 years for the original sale was up... but the mall had been sold 3 times already and the new owner was a bit hesitant to extend... however, they were contractually obligated to do so... so we got another 20 year extension to stay grandfathered...


The property was legally sold and owned by mega, the mall could not do anything about it...


BTW, I still think that the HOA could foreclose on the property... there is no requirement (that I know of) for the sale to be recorded... the first foreclosure would have been done and the bank would have to show that in court so then the HOA would take over the property or the bank would have to pay the fees... just my thinking...


But, since you say the law has changed it probably is not worth the trouble now...