With the recent "great recession" in the economy and the deflation of real estate values across the country, many people are facing financial distress, divorce, and unemployment. Homeowners have been forced to file bankruptcy, stop making their house payments, and forcing the lender to foreclose on the property. The issue of homeowner's association dues is becoming increasingly problematic, as many homeowners are not aware of their responsibilities.
Many homeowners believe that when they stop making their mortgage payments, they are no longer required to pay the homeowners association dues. Unfortunately, this is not the case. The owner of the home is personally liable for all dues and assessments until the bank actually forecloses on the home.
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Homeowners who have filed bankruptcy can still face consequences from the unpaid association dues. This may be true after the discharge of the bankruptcy too. During a bankruptcy, there are legal ways to surrender the property and stop the clock on the association dues so they will not continue to accumulate. A bankruptcy attorney may be able to include past dues and assessments in a bankruptcy, but only if the legal formalities are followed.
Until the bank actually forecloses on a home, the homeowner is still liable for the homeowner's association dues. This holds true even if the property is vacant. Until the title actually transfers to the foreclosing lender, the dues remain the responsibility of the homeowner.
Over the past few years, homeowners associations have become quite aggressive in pursuing homeowners for unpaid dues. The homeowners association may place a lien on the property for any assessments levied against that property. This action can trigger a foreclosure by the homeowners association.
As the number of homes become foreclosures and thereby owned by the bank, the homeowners association may file a lawsuit and obtain a judgment against the individual homeowner. Depending on the type of community a homeowner lives in, the late fees can vary. In Arizona for example, there is no limit on late charges with a condominium. However, Planned Communities have a limit.
A judgment can be a costly way to learn this valuable lesson. The judgment will include past association dues, as well as late fees, violations of the Covenant, Conditions & Restrictions which attach fines and attorney costs. Attorney costs continue to rise on a monthly basis because the attorney charges a monthly fee for managing the account until it is paid in full or settled.
For some homeowners, losing their home to foreclosure may be inevitable. With the knowledge of the ramifications of the foreclosure regarding the HOA, additional costs can be limited or avoided. As always, you should consult with legal counsel.
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