Do I honor past HOA fees after a foreclosure?

Question

Hello everyone and thank you in advance.

I recently sold two homes with a 1031 exchange.  I hit the county auction and won a nice property with a lot of potential.  Now that I'm in the waiting period, a few questions came up.  I think this is just wishful thinking here but I have to ask... Should I acknowledge the HOA at all?  Here's my thinking behind this...

Is it true that a buyer of a home agrees to be governed by the HOA at the time of sale?  If I did not agree to any terms of the HOA and I bought through the county auction, am I a member of the HOA?  In other words, what right does the HOA have to govern me and my property if I never agreed to the HOA terms?  Is it possible that I could be the only homeowner in the community without an HOA?  Additionally, do I have to pay their fees going forward and do I have to pay fees from the last owner?

Any help would be appreciated.

Wayne Brooks · Answer

Yes, the property is part of, and governed by, the hoa....it doesn’t matter if you accept/agree.

Odd that the hoa lien would be “paid by the foreclosure process”.  This generally only happens if your auction price was more than the foreclosure amount owed to the bank, and the hoa debts were paid from the surplus.

No foreclosure in any jurisdiction “has to pay all the outstanding liens”.  If there is a surplus, you may can get the water lien paid from it, maybe not.

Dave Foster · Answer

@Jamie Rose, In a 1031 you do have some time after the closing of the sale to identify your potential replacements.  That's what makes it work for @Darrell D.  Even though auction timelines can be tight we can make them work with a 1031 because there's an additional 45 days after closing (Darrell's an over achiever :) to identify potential replacements.   So an auction could come and go during that time and if you don't get that property it doesn't kill you.

Auctions can be done with a 1031.  But you gotta be on your toes like Darrell was.  Fortunately he's also working with a municipality that allows that extra time to close the purchase rather than a same day closing like many municipalities.

Tyler Mullen · Answer

@Darrell D. If you buy a property in an HOA, you're in the HOA, it's part of the title.  Review your title report and the legal description you will see it described something like "...Unit 42 of The Springs Condominium Association... recorded in the Map of Plats 11 in the County of ..."  So what you're buying is literally Unit 42 of The Springs, not just an item of real property.

Imagine buying a lifetime supply of massages, they are not going to let you take the massage table home.

I suppose they could let you out of the HOA, or they could entertain an offer from you to buy your way out, though I've never heard of that actually happening.  If it's a stand alone house it's conceptual, can't imagine how that would work if you were buying a unit on the 52nd floor.  You'd be landlocked and they wouldn't let you build an elevator down the side of their building.  Interesting idea, I'm curious so I'll be following this, let us know how it turns out.

If the HOA recorded their unpaid dues it may survive and you might owe it as the new owner, check with title and your state law.  According to nolo.com "Approximately 20 states have laws that give HOA assessment liens (or, in  some cases, condominium association liens or COA liens) super lien  status under certain circumstances.  "For example, in Colorado, HOAs have a  super lien that has priority over a first deed of trust (mortgage) to  the extent of six months worth of delinquent assessments (Colo. Rev.  Stat. § 38-33.3-316). In Nevada, nine months of assessments have super  lien status (Nev. Rev. Stat. § 116.3116)."

Tyler Mullen, CFE

Darrell D. · Answer

@Jamie Rose We need to identify the next property within 30 after selling.  After we identify the property, we have 90 days to secure the financing.  I've been working with Dave Foster on the 1031 Exchange.  @Dave Foster

@Tyler Mullen That's a great answer Tyler.  Thank you for your time on that.  The properties I sold had an HOA and they were identified on the title now that you mention it.  It was was a strange situation and I didn't see in any post or Youtube video so I figured I would ask.  About the liens... there is a small HOA lien on the property of about $2k.  I contacted the HOA and they said there's another amount of approximately $2k aside from the lien... so about $4k total.  The lien will be paid during the foreclosure process(paid by the county), but I'm not sure if I have to pay the remaining fees.  The purchase is still a great deal so I'm not too concerned but of course I'd rather not pay.  Another situation has come up... there's an unpaid water bill of $750.  In the state of Ohio, the bill stays with the property and not the user.  It would seem the foreclosure process should pay for this also since they are required to pay all outstanding debts against the property but when I called the sheriffs office, they acted like nobody asked the question before and they simply said it won't paid for during the foreclosure process.  I tried to contact the foreclosure lawyer, but of course they didn't call me back.  It would be nice if the two government offices communicated the issue but the water company seems content on leaving the payment up to the new buyer.

Chad U. · Answer

First off, HOA liens have a statute of limitations of 5 years in OH (I believe), so that lien will no longer be valid if it was recorded more than 5 years ago.  Also, there is no HOA Superlien status in OH, however that does not mean you are off the hook for unpaid dues or liens.  It is the Convenants, Conditions and Restrictions (CCR's or Condo Bylaws) that govern what happens to any unpaid HOA liens or unpaid dues that have accumulated prior to a foreclosure or if the property is surrendered back to the Lender by any other means.  I highly suggest digging this document out of the county recorder's office and look for this stipulation.

I'm not familiar with Montgomery county, but the water dues and unpaid taxes may or may not be paid from the foreclosure proceeds, you'll need to inquire again with someone in the Sheriff's dept or get advice from a foreclosure attorney.  It seems every county is different.....some I've had to pay all outstanding liens from water etc and taxes prior to us taking it to foreclosure, other I haven't.  As a few have mentioned above, if your bid was above what was owed to the bank, then most likely any remaining surplus will be put towards these prior to the former owner/borrower.

Darrell D. · Answer

@Irina Belkofer Thank you Irina.  That's good news. I don't have any intention of not paying what I should but I was wondering if somehow I bypassed the HOA altogether.  As I suspected, it was just wishful thinking.  :)

@Wayne Brooks Thanks Wayne.  The Sheriff actually instructed me to look at the docket to see if the lien would be paid.  After reviewing the documents a few weeks ago, I could not find where the docket stated if the lien would be paid.  Somebody told me the liens are often paid during the process but I can't recall who. I'm learning now that not many counties pay liens during the foreclosure process.  Also sounds that Montgomery County, Ohio (where I bought the auction) doesn't always pay the lien... it depends on the situation but I'm not sure on how or why.  Anyway, I hope I'm not mistaken about this lien being paid.

This auction was different from the start.  The owner past away about 10 years ago and the home has been empty for 8 years.  I heard he was a veteran but I can't confirm if the home had a VA loan.  It seems there would be many hands in this process. d I don't know why it took this long to complete the process but surprisingly the home is in good condition.

Irina Belkofer · Answer

@Darrell D. consider HOA as the land on which the house built. You can get rid of it only by selling the house.

As for past fees: if HOA haven't put lien on the property, you don't have to pay - it erased by the auction/Sheriff sale.

However, lately, when the prices are really high, the HOA do a lot of attempts to collect past HOA fees from new buyer.

Your liability to pay HOA fees starting now at the day of the auction (not the day when you get the title, like it was before). Good luck arguing with HOA - in most cases, you'll get powerful enemy.

If you don't pay HOAfees, they'll foreclosure on you - now the process takes few months.

More of that, you have to comply with their ByLaws, Ruls&Reg which don't you rent property, or have pets or paint exterior or whatever. You really have to know these before you buy......that's why prices on condos are not going too high on the auctions: you buy a property under someone else' roof

Jamie Rose · Answer

Hi Darrell -

Congrats on the sales!

I can't help - but am interested to hear the feedback from the pros in this area. I appreciate your questions - and I have even one more. Do you not have to identify your 1031 properties before selling? Or is it just that you have to close on the next properties within the allotted timeframe?

With thanks,

Jamie Rose

Do I honor past HOA fees after a foreclosure?

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