HOA, Condo Association Group Weighs in on Foreclosures Over Unpaid Assessments, Fines

Michael L. Hyman authored the firm’s latest Miami Herald “Real Estate Counselor” column. The article, “HOA, Condo Association Group Weighs in on Foreclosures Over Unpaid Assessments, Fines” focuses on recent updates by the Community Associations Institute to its public policy on association liens and foreclosures. It reads:

Homeowners and condo associations foreclosing against their owner members have been making headlines in Florida and across the country.

“World War II vet, 95, fears foreclosure after losing suit to Florida condo association,” reads one recent headline from the Tampa Bay Times; “Woman fears foreclosure after carpet dispute with condo association” reports the Chicago ABC affiliate; “Arizona HOAs can foreclose for $1,200 in fees” tops a story from the Arizona Republic; “HOA bought a woman’s house for $3.24 after she missed her dues payments,” says a Fox News story from Georgia.

These and other headlines during the last couple of years have shone a light on questionable foreclosure actions by community associations.

Legislation restricting association liens and foreclosures has been receiving attention in North Carolina, South Carolina, Georgia and Colorado, where a new law to create hurdles for HOAs before they can file for foreclosure went into effect in August.

In mid-December, the Community Association Institute’s board approved updates to its public policy on foreclosures by associations, marking the first time it has changed its recommendations for state foreclosure laws in many years.

The organization acknowledges the changes have come after association foreclosures for unpaid assessments or fines have been under increased scrutiny by media outlets and state legislatures.

The updated policy emphasizes fair and equitable foreclosure procedures that protect owners and associations alike. While it does not change the core guidance that associations should be allowed to foreclose in cases of delinquent assessments, the new policy makes important clarifications and concessions that include:

• “CAI does not support state law permitting foreclosures solely for fines but does support the use of liens for fines.
• CAI supports state law that allows for reasonable payment plans for outstanding collections as determined by the association’s governing documents and recognizes the importance of recovering legal costs via explicit references to collecting them.
• CAI supports association rules that provide for a minimum delinquency before an association may act on a foreclosure.
• References explicitly stating CAI supports foreclosure only after reasonable minimum delinquencies are met and after a reasonable opportunity is given to correct delinquencies.”

Other details of the new policy state that it encourages dialogue between owners and community directors as well as providing owners reasonable opportunities to cure or contest any default prior to the use of third-party collectors or foreclosure filings.

The policy recommends that owners be treated fairly and allowed reasonable time to pay their arrears, and that associations take into account key factors such as the length and amount of the delinquency.

The new policy concludes by stressing that the organization believes foreclosure should be considered a final resort that comes only after other reasonable attempts to compel owners to fulfill their obligations.

Just as with lenders and taxing authorities facing delinquent accounts, community associations can be left with no other recourse but to foreclose after all reasonable options have been exhausted.

Owners who do not pay their dues become a burden on their fellow association members, who must end up paying the delinquent owner’s share of the expenses while the debtor continues to benefit from the maintenance of their property value resulting from those expenditures.

Additionally, many Florida condo associations facing major budget increases stemming from new inspection and reserve requirements are resorting to bank loans, which are underwritten based on the lien rights backing their collections. Curtailing those rights could negatively impact their ability to secure such critical financing at the best possible rates and terms. . .

Michael concludes his article by noting that it is an unfortunate necessity that associations must be allowed to maintain their rights to liens and foreclosures, but CAI’s newly updated public policy should serve as the governing paradigm for all state legislatures and boards of directors to adhere to regarding such actions. Click here to read the complete article in the newspaper’s website.

Our firm salutes Michael for sharing his insights with the readers of the Miami Herald on CAI’s new public policy on association liens and foreclosures. We write about important matters for community associations in this blog and our Herald column, which appears every two weeks on Sundays, and we encourage association directors, members and property managers to click here and subscribe to our newsletter to receive our future articles.