Past due HOA fees on just purchased property.

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Past due HOA fees on just purchased property.

Larry Ott
Investor · New Albany, IN · Member since 2014 · 20 posts · 9 votes

I recently purchased a SFR property near Ft Myers, FL at auction. It was a foreclosure property purchased through a sheriffs sale. I completed a normal title search and upon sale purchased a title policy. I have a clear title.

It is in a gated community, I contacted the HOA to get set up with them and now find that there is a little over $4,000.00 in back HOA fees that they are looking to me to pay. These fees go back over a year.

My question is: Has anyone had experience with a situation like this, am I am just going to get stuck paying these fees?

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Wayne Brooks
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
6y

@Larry Ott Yes, in Fl the his debt stays with the property after a bank foreclosure, whether there was a lien filed or not. I bought a personal home there in 2010, same thing....$3,200.  
Some will say contact your title insurance, but I’m sure there was an Exception, in either the A or B section, since the title company obviously knew you bought at a foreclosure auction. 
Lee county was much more fun when the auctions were still live, and they had 150 houses a day. 

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  • Andrew B.
    Rockaway, NJ · Member since 2016 · 2k+ posts · 2k+ votes
    6y

    @Larry Ott it'll depend on your state laws. Generally, the first lien holder's foreclosure (the bank) cancels any subservient liens. However, HOA fees can follow the property. In NJ, where I serve on my condo board, if a bank forecloses we get 6 months of fees when they sell to a buyer and nothing else.

    1Reply
  • Larry Ott
    OP
    Investor · New Albany, IN · Member since 2014 · 20 posts · 9 votes
    6y

    Thanks Andrew

    0Reply
  • Kyle J.
    Rental Property Investor · Northern, CA · Member since 2012 · 5k+ posts · 5k+ votes
    6y

    @Larry Ott This has come up on here before, and although it varies by state, I believe in Florida a foreclosure sale does not eliminate the HOA debt. So unfortunately you're likely stuck with this bill.

    Here's some more reading on the topic:

    https://www.biggerpockets.com/forums/41/topics/167855-liens-after-forclosure

    https://www.primerus.com/business-law-articles/a-warning-to-investors-in-florida-superior-liens-survive-foreclosure-sales.htm

    0Reply
  • Walter Holmes
    Real Estate Consultant · 33033 · Member since 2018 · 65 posts · 23 votes
    6y

    Tax and HOA liens survive florida foreclosures.

    0Reply
  • Larry Ott
    OP
    Investor · New Albany, IN · Member since 2014 · 20 posts · 9 votes
    6y

    Thanks Kyle J for the reading material. Thank you Walter Holmes for your input. Looks like I will be picking up the tab on past due HOA fees.

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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    6y

    @Larry Ott Yes, in Fl the his debt stays with the property after a bank foreclosure, whether there was a lien filed or not. I bought a personal home there in 2010, same thing....$3,200.  
    Some will say contact your title insurance, but I’m sure there was an Exception, in either the A or B section, since the title company obviously knew you bought at a foreclosure auction. 
    Lee county was much more fun when the auctions were still live, and they had 150 houses a day. 

    1Reply
  • Peter Walther
    Specialist · Winter Springs, FL · Member since 2009 · 1k+ posts · 747 votes
    6y
    Originally posted by @Larry Ott:

    I recently purchased a SFR property near Ft Myers, FL at auction. It was a foreclosure property purchased through a sheriffs sale. I completed a normal title search and upon sale purchased a title policy. I have a clear title.

    It is in a gated community, I contacted the HOA to get set up with them and now find that there is a little over $4,000.00 in back HOA fees that they are looking to me to pay. These fees go back over a year.

    My question is: Has anyone had experience with a situation like this, am I am just going to get stuck paying these fees?

    Submit a claim to the title insurance underwriter, not the policy issuing agent. If your policy has an exception for HOA fees the claim will probably be denied and then you'll have to see if you can negotiate a reduction in the HOA's demand. The association doesn't really have an incentive to reduce its demand so don't be surprised if they don't. Unfortunatly, I believe Florida Statute 720.3085(2)(a) provides the answer to your question. It reads:

    (2)(a) A parcel owner, regardless of how his or her title to property has been acquired, including by purchase at a foreclosure sale or by deed in lieu of foreclosure, is liable for all assessments that come due while he or she is the parcel owner. The parcel owner’s liability for assessments may not be avoided by waiver or suspension of the use or enjoyment of any common area or by abandonment of the parcel upon which the assessments are made.

    I'm not an attorney and this is not legal advice.  It's my opinion based on many years of handling title insurance claims throughout the country for various title insurance underwriters.  Good luck.

    1Reply
  • Larry Ott
    OP
    Investor · New Albany, IN · Member since 2014 · 20 posts · 9 votes
    6y

    Thanks Peter, I have title insurance on the property, I expect that a title search would pick up only liens/encumbrances that have been filed against the property. Since the HOA has not filed any liens against the title, the title company would have no liability.......is that correct?

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  • Tom GimerBusiness Member
    DMV · Member since 2017 · 3k+ posts · 3k+ votes
    6y

    @Peter Walther If the "seller" fails to disclose the existence of an HOA, any CCRs of record (included as special exceptions in the policy) don't reference mandatory periodic assessments, there is no recorded HOA lien, and the auction terms state that the buyer takes title subject to any existing dues or assessments, how does the title claim shake out?

    My money is on a disclaimer of coverage. 

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  • Caleb Heimsoth
    Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
    6y

    @Larry Ott. Call your title insurance policy and see if this is covered. I had This issue with old liens and my title insurance paid for it

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  • Peter Walther
    Specialist · Winter Springs, FL · Member since 2009 · 1k+ posts · 747 votes
    6y
    Originally posted by @Larry Ott:

    Thanks Peter, I have title insurance on the property, I expect that a title search would pick up only liens/encumbrances that have been filed against the property. Since the HOA has not filed any liens against the title, the title company would have no liability.......is that correct?

    If there was no claim of lien recorded I believe you're correct, they will probably deny liability but it never hurts to submit a claim.  Worst they can do is deny it.

    0Reply
  • Peter Walther
    Specialist · Winter Springs, FL · Member since 2009 · 1k+ posts · 747 votes
    6y
    Originally posted by @Tom Gimer:

    @Peter Walther If the "seller" fails to disclose the existence of an HOA, any CCRs of record (included as special exceptions in the policy) don't reference mandatory periodic assessments, there is no recorded HOA lien, and the auction terms state that the buyer takes title subject to any existing dues or assessments, how does the title claim shake out?

    My money is on a disclaimer of coverage. 

    Florida is a judicial foreclosure state and Larry bought at the foreclosure sale so there was no Seller.  Based on what I know I think the claim will probably be denied but it never hurts to ask.

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  • Tom GimerBusiness Member
    DMV · Member since 2017 · 3k+ posts · 3k+ votes
    6y
    Originally posted by @Peter Walther:
    Originally posted by @Tom Gimer:

    @Peter Walther If the "seller" fails to disclose the existence of an HOA, any CCRs of record (included as special exceptions in the policy) don't reference mandatory periodic assessments, there is no recorded HOA lien, and the auction terms state that the buyer takes title subject to any existing dues or assessments, how does the title claim shake out?

    My money is on a disclaimer of coverage. 

    Florida is a judicial foreclosure state and Larry bought at the foreclosure sale so there was no Seller.  Based on what I know I think the claim will probably be denied but it never hurts to ask.

    That's why I put "seller" in quotation marks. The "seller" here is an agent of the secured party who provides no warranties, claims to know nothing about the subject property and refuses to complete and execute standard title company documents. Standard ALTA owners + unrecorded lien = no pay (imo).

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  • Peter Walther
    Specialist · Winter Springs, FL · Member since 2009 · 1k+ posts · 747 votes
    6y
    Originally posted by @Tom Gimer:
    Originally posted by @Peter Walther:
    Originally posted by @Tom Gimer:

    @Peter Walther If the "seller" fails to disclose the existence of an HOA, any CCRs of record (included as special exceptions in the policy) don't reference mandatory periodic assessments, there is no recorded HOA lien, and the auction terms state that the buyer takes title subject to any existing dues or assessments, how does the title claim shake out?

    My money is on a disclaimer of coverage. 

    Florida is a judicial foreclosure state and Larry bought at the foreclosure sale so there was no Seller.  Based on what I know I think the claim will probably be denied but it never hurts to ask.

    That's why I put "seller" in quotation marks. The "seller" here is an agent of the secured party who provides no warranties, claims to know nothing about the subject property and refuses to complete and execute standard title company documents. Standard ALTA owners + unrecorded lien = no pay (imo).

     Not to split hairs Tom but the high bidder gets a Certificate of Title from the Clerk of the Court who certifies the named party was the high bidder and the party to whom the property was sold.  I don't believe the Clerk is the Plaintiff's agent nor does he/she convey the property, I believe that happens by operation of law.  Sort of like when someone inherits property, title passes per statute.  It's not like a non judicial sale or a Deed of Trust foreclosure where the Trustee conveys the property.

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  • Tom GimerBusiness Member
    DMV · Member since 2017 · 3k+ posts · 3k+ votes
    6y
    Originally posted by @Peter Walther:
    Originally posted by @Tom Gimer:
    Originally posted by @Peter Walther:
    Originally posted by @Tom Gimer:

    @Peter Walther If the "seller" fails to disclose the existence of an HOA, any CCRs of record (included as special exceptions in the policy) don't reference mandatory periodic assessments, there is no recorded HOA lien, and the auction terms state that the buyer takes title subject to any existing dues or assessments, how does the title claim shake out?

    My money is on a disclaimer of coverage. 

    Florida is a judicial foreclosure state and Larry bought at the foreclosure sale so there was no Seller.  Based on what I know I think the claim will probably be denied but it never hurts to ask.

    That's why I put "seller" in quotation marks. The "seller" here is an agent of the secured party who provides no warranties, claims to know nothing about the subject property and refuses to complete and execute standard title company documents. Standard ALTA owners + unrecorded lien = no pay (imo).

     Not to split hairs Tom but the high bidder gets a Certificate of Title from the Clerk of the Court who certifies the named party was the high bidder and the party to whom the property was sold.  I don't believe the Clerk is the Plaintiff's agent nor does he/she convey the property, I believe that happens by operation of law.  Sort of like when someone inherits property, title passes per statute.  It's not like a non judicial sale or a Deed of Trust foreclosure where the Trustee conveys the property.

    You're right. But it doesn't change my reasoning. My essential point was when you are dealing with a conveyance with no warranties, which we are here as well as in the non-judicial (or quasi) foreclosure framework, that requires you to do your due diligence up front... all of it... and also to factor the unknown into your bid. So making a title claim for an unrecorded lien that, as it later turns out has priority or otherwise survives the foreclosure, that's a loser. I think we are actually in agreement on that. 

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  • Peter Walther
    Specialist · Winter Springs, FL · Member since 2009 · 1k+ posts · 747 votes
    6y
    Originally posted by @Tom Gimer:
    Originally posted by @Peter Walther:
    Originally posted by @Tom Gimer:
    Originally posted by @Peter Walther:
    Originally posted by @Tom Gimer:

    @Peter Walther If the "seller" fails to disclose the existence of an HOA, any CCRs of record (included as special exceptions in the policy) don't reference mandatory periodic assessments, there is no recorded HOA lien, and the auction terms state that the buyer takes title subject to any existing dues or assessments, how does the title claim shake out?

    My money is on a disclaimer of coverage. 

    Florida is a judicial foreclosure state and Larry bought at the foreclosure sale so there was no Seller.  Based on what I know I think the claim will probably be denied but it never hurts to ask.

    That's why I put "seller" in quotation marks. The "seller" here is an agent of the secured party who provides no warranties, claims to know nothing about the subject property and refuses to complete and execute standard title company documents. Standard ALTA owners + unrecorded lien = no pay (imo).

     Not to split hairs Tom but the high bidder gets a Certificate of Title from the Clerk of the Court who certifies the named party was the high bidder and the party to whom the property was sold.  I don't believe the Clerk is the Plaintiff's agent nor does he/she convey the property, I believe that happens by operation of law.  Sort of like when someone inherits property, title passes per statute.  It's not like a non judicial sale or a Deed of Trust foreclosure where the Trustee conveys the property.

    You're right. But it doesn't change my reasoning. My essential point was when you are dealing with a conveyance with no warranties, which we are here as well as in the non-judicial (or quasi) foreclosure framework, that requires you to do your due diligence up front... all of it... and also to factor the unknown into your bid. So making a title claim for an unrecorded lien that, as it later turns out has priority or otherwise survives the foreclosure, that's a loser. I think we are actually in agreement on that. 

    You're right, we are in agreement.

    0Reply
  • Andrew B.
    Rockaway, NJ · Member since 2016 · 2k+ posts · 2k+ votes
    6y
    One thing that I would like to add, since it seems like you are responsible for the fees, is that you can go to the board and try to negotiate. They are not likely to negotiate on hard fees, like association dues and lawyer fees, but if you present yourself as someone who just wants to improve the property and the community (try not to come off as an investor or flipper) they have the power to waive older fees, and/or set up a payment plan for the fees if that helps you.
    0Reply
  • Larry Ott
    OP
    Investor · New Albany, IN · Member since 2014 · 20 posts · 9 votes
    6y

    I'm going to write a letter to the board and ask them to waive the late charges and interest......

    0Reply
  • Alan Salgado
    Rental Property Investor · Derwood, MD · Member since 2016 · 46 posts · 17 votes
    4y

    @Larry Ott can I ask how you bought the title insurance? Apparently there is no closing after the online sale. Just immediate payment via wire and the title is mailed out.

    0Reply
  • Larry Ott
    OP
    Investor · New Albany, IN · Member since 2014 · 20 posts · 9 votes
    4y

    Since it's been over a year that I posted this, will bring everyone up to date..... I felt that since it was common knowledge that an HOA existed, that the title company, if they were doing their job, knowing that Florida allows HOA fees to follow the property without a lien, would have checked with with the HOA. I filed a claim with the title insurance company. In this case there were actually two HOA's involved, found that the language in the title policy excluded one of the HOA's. But the other HOA was not excluded, they paid my claim, got a check for $3,500 +/-.

    Peter Walther said in one of his replies to "file a claim, worst they can do is deny it", glad I did!

    1Reply
  • Peter Walther
    Specialist · Winter Springs, FL · Member since 2009 · 1k+ posts · 747 votes
    4y
    Originally posted by @Larry Ott:

    Since it's been over a year that I posted this, will bring everyone up to date..... I felt that since it was common knowledge that an HOA existed, that the title company, if they were doing their job, knowing that Florida allows HOA fees to follow the property without a lien, would have checked with with the HOA. I filed a claim with the title insurance company. In this case there were actually two HOA's involved, found that the language in the title policy excluded one of the HOA's. But the other HOA was not excluded, they paid my claim, got a check for $3,500 +/-.

    Peter Walther said in one of his replies to "file a claim, worst they can do is deny it", glad I did!

    Glad it worked out.  I'll send you an invoice for my 10% fee.

    0Reply
  • Larry Ott
    OP
    Investor · New Albany, IN · Member since 2014 · 20 posts · 9 votes
    4y

    Unfortunately Peter I spent your 10% on a really nice evening out for my wife and I. That was really good advice, but better luck next time :)

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