HOA Lien/Dues at foreclosure

13 Replies

I'm analyzing a 1st position NPL to buy for which the current note holder has started foreclosure. I found out that there are about $5600 in unpaid HOA dues and I found an older lien on the property from the HOA for $2000 (included in the higher figure). The home is located in WA state. For my calculations, will I be required to pay the HOA dues at FC or will these be attached to the former borrower?

Usually HOA dues always stick with the property from my understanding. If you become the new owner you also are responsible for back HOA unless paid be seller or you at closing.

@Bob Malecki , the HOA lien stays with the property and not the former owner. Does WA state have a Safe Harbor statute, similar to Florida? If so, then you'll only owe the lesser of 12 months past dues or 1% of original loan balance. You might want to get the CCR of the association as well to check If the HOA declaration contains a subordination of lien to mortgage clause limiting a first mortgagees liability for pre-title assessments.

To mitigate your risk, you'd likely be safest just assuming the entire amount will be owed, plus attorneys’ fees, costs, interest and late fees.

You might also speak to the HOA president and find out the information before involving an attorney or title.

@Bob Malecki A couple years ago i bought a condo with around $2000 in hoa fees due. A few people around thought buying the property was foolish. I bought the property at discount, paid the fees and walked into equity.

I guess the point is the costs of hoa fees, taxes, repairs and maint is all relevant to what your buying the property for and what it is worth.

Frank

Good input folks, thanks. I'll assume that I will have to cover the HOA fees then, no prob, just looking for a reality check on what my hard costs will be on this one. There's lots of equity in this deal so those fees won't put much of a dent in my margin.

Bob

Washington is a super lien state, so the lien is actually senior to your DOT, regardless of recording date. The HOA could potentially foreclose and wipe out your DOT. In a foreclosure of the DOT, if the property sells at the sale, this lien is paid first. If it doesn't sell and you gain title, you will need to pay off the lien before you can convey title to a buyer.

Really Mike? Can you forward some info on this? According to the Nolo article at http://www.nolo.com/legal-encyclopedia/washington-hoa-coa-foreclosures.html

In Washington, COA liens are prior to all other liens, except for:

  • liens and encumbrances recorded before the COA recorded the condo declaration
  • liens for real property taxes (and other governmental assessments or charges), and
  • a mortgage on the condo that was recorded before the delinquency date of the assessment (Wash. Rev. Code § 64.34.364(2)).

COA Super Liens

In Washington, a COA is entitled to a super lien over mortgages recorded before the date that the assessment became delinquent in an amount equal to six months worth of delinquent common expense assessments (Wash. Rev. Code § 64.34.364(3)). (This can be reduced by up to three months under certain circumstances and, if the COA elects to foreclose nonjudicially, it is not entitled to a super lien.) (Wash. Rev. Code § 64.34.364(4),(5)).

So according to the above, the lien would need to be foreclosed in a judicial manner to be enforced as a super lien. 

Anyone have an opinion on this? 

After reviewing the O&E report I just received, there is a PUD Rider to the note that allows me to add the unpaid fees to the balance at foreclosure, so at least there is an offsetting income potential on that expense.

Bob

@Bob Malecki

   Good post but you lost me at  COA  What is a COA ?

   Thanks,

   Mark G

   

@Bob Malecki

I think you are correct here as your info in specific to Washington State.  I was going off of this NOLO article which is general info on HOA super liens. While Washington is a super lien state, it seems that there is separate treatment for COA and HOA.

Super Lien. A super lien is a category of lien that, pursuant to state statute, is given a higher priority than all other types of liens. When it comes to HOA assessment liens, a super lien refers to that portion of a homeowners' association lien that is given higher priority than even the first-mortgage holder, placing the interest of the HOA in front of the first mortgage.

@Mark Gustafson

COA = Condominium Owners Association

Hi @Bob Malecki ,

The people at the auction always tell me that the new owner is only responsible for the previous 6 months of HOA dues. That lines up with the research you found :-)

@Chad Urbshott   Can you please explain the Safe Harbor statute .Do I owe only 12 months of past dues in FL when I buy in the auction?

Thanks.

@Yechiel Abekassis

Unfortunately no, the safe harbour only applies to the lender foreclosing if they take it back from the auction. When a 3rd party wins the bid, they are responsible for the entire HOA lien plus late and legal fees.

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