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Eric
Eric, Financial Manager
Category: Finance
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Experience:  Loan servicing, counseling and real estate expert. Foreclosure Expert and Financial Planner.
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We bought a foreclosed house from a bank. The HOA wants us

Customer Question

We bought a foreclosed house from a bank. The HOA wants us to pay the unpaid HOA fees and penalties of the previous owner. We have not made an HOA payment yet because the HOA would use our payments against the previous liability. Months after we took ownership, the HOA filed a lien and wants us to pay all related costs associated with that as well. Can you give me the law on this matter?
Submitted: 4 years ago.
Category: Finance
Expert:  Gerri A Harrison CFP EA replied 4 years ago.

When you purchase a property, you purchase it with all outstanding debts against it. And yes you would be responsible for the back HOA fees.

 

One suggestion however - did you have a title search performed at the time you obtained the property? If yes, you may want to contact the title company. It is their responsibility to determine that there is a clear and clean title to the property. They may be willing to pay those HOA fees since you did not purchase a clean title. This is what you are insuring for when you pay the title insurance company.

 

I know this is true with back taxes and mortgages. I cannot be 100% sure that HOA fees would be covered under it, but it makes sense if you do not have a clean title because of these fees that the cost would be picked up by the title insurance company.

 

If the title insurance company indicates it is not within their coverage requirements, I would recommend then that you pay the fees. Then sue the previous owner, even if the owner was a bank because of foreclosure. These fees outstanding should have been disclosed to you at the time of purchase since they would have been known to be outstanding. Depending on the dollar amount you might be able to accomplish this in small claims court which means very little cost to you. You do not need a lawyer to go to small claims court since you are an individual. The bank would be required to have a lawyer as a corporation and they may elect to pay the HOA fees rather than the legal fees required to fight it if the amount is not significant.

 

Hope this gives you some ideas. If you want more definitive answers I would recommend that you either post the question on the legal forum or consider doing a one hour consultation with a lawyer to determine your legal rights.

 

Customer: replied 4 years ago.

The laws differ from state to state, and this seems contrary to the info in FL statutes section 720. For instance, NV has a 9 month clause, where buyers of foreclosures only have to pay the last 9 mo's of overdue fees, AZ, where buyers do not have to pay at all. I'm sorry, but I do not accept your answer since it does not cite FL law. Perhaps I need to consult a FL real estate lawyer. Thank you though.

Expert:  Eric replied 4 years ago.

The Florida HOA statutes can be very confusing as there have been several updates/changes in the last 2yrs. In this case, it would depend on the type of property it is. If it's a condo, there is a 6mo priority lien and a SFR would have a 12mo priority lien. What that translates to is this. If the foreclosure date was 1/1/2010, the bank would be liable to pay all HOA dues back 6mos from this date incl reasonable legal fees to the HOA (condo). If it was a SFR, then they would pay back to 1/1/09 of all dues, late fees, interest, legal fees, etc. When you closed escrow, the title company would have had a demand from the HOA and paid everything legally owed to them to clean the slate for you, the new owners. The HOA likely have a ledger of past due amounts from the old owner that predates these foreclosure statutes.

Those amounts are only collectible from that prior owner and they cannot legally apply any payment made by you to those prior amounts. The date you closed escrow and forward is all you're responsible for. period.

Hope this is helpful.

Customer: replied 4 years ago.
<p>Eric,</p><p>Thank you. It is an SFR. I would like to accept your answer, if I could just have you cite the information you've given me so that I can present it to the board as such, please. </p><p>What I see is that the bank is liable for HOA dues back 12 months from the date of the foreclosure, and I understand the reasoning is that when people stop paying the bank, they also stop paying their HOA at that time, if not sooner...and sometimes banks drag out the foreclosure process, therefore they become liable for the 12 month's dues. Your firm response is that the new owners are only liable for HOA fees from the date of purchase forward, correct? </p><p>I forgot to mention, I leave for the board meeting in 2 & 1/2 hours! </p>
Expert:  Eric replied 4 years ago.
When a foreclosure takes place, it's like drawing a line in the sand. The statute in Florida is for the bank to pay 12mos of dues and legal fees, etc back 12mos from that foreclosure date. That protects the HOA from getting nothing and the bank from having to payoff the entire history of the HOA defaulted amounts. Basically, once that 12mos is paid, then whatever is owed prior to that is a loss to the HOA. (unless they can collect it from the prior homeowner). The title company and your title policy when you purchased the home is responsible to clear title and that includes the satisfaction of the HOA lien. If the HOA is trying to collect past owner fees from you, they cannot legally do that. You have nothing to do with this property prior to when you purchased it the prior obligations of the former owner. The bank should have taken care of the 12mo priority lien and then it's over. You would only pay for the time that you have owned the property and it's not retroactive.
Eric, Financial Manager
Category: Finance
Satisfied Customers: 558
Experience: Loan servicing, counseling and real estate expert. Foreclosure Expert and Financial Planner.
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Customer: replied 4 years ago.
I need the citation, please. Unless the board sees the citation, I'm afraid they will still question it.
Customer: replied 4 years ago.

Eric,

I just realized that you may not be able to reach me to give me the citation since I already accepted, so in case, my email address is XXXXX@XXXXXX.XXX. I will add a bonus if you respond.

Greta

Expert:  Eric replied 4 years ago.
Unfortunately, I cannot send direct email to you and giving a citation specific is not really possible. I hope that all goes well with the HOA. They tend to not understand the law very well and are is such desperation for money, that they will try anything to get paid. The statutes are clear in terms of the first mortgagee (bank) foreclosing a lien and if they were paid their 12mo priority lien, then it's over and they cannot collect anything further. Unfortunately for the HOA, its a loss. They don't like to throw in the towel like that.

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