HOAs Foreclosing on Banks

A December 26 CNN Money report says hundreds of homeowners and condo associations are foreclosing on banks that have failed to pay dues and other expenses on the properties they've repossessed.

Ben Solomon, a Miami-based attorney, according to the report, has so far filed more than 1,100 liens against banks on behalf of homeowners associations (HOAs), has pursued 131 foreclosures, and in more than 90% of the cases, has the banks agree to a settlement by paying the bills. Only in very rare cases do HOAs end up pushing the foreclosure all the way through to the auction sale of the properties. This has happened only once for Solomon. In early November, Keys Gate Community Association in Homestead, Fla., brought a foreclosure on a property owned by mortgage servicer, NovaStar, which owed $22,890 in back dues and fees. By mid-November, the association foreclosed on NovaStar and the home was sold at auction to a third party for $62,000, fully paying off the debts to the association.

Since the start of the housing crisis, more than 400,000 homeowners in Florida have lost their homes to banks on foreclosure. Many of these homeowners lived in HOA-governed communities. HOAs are organizations that collect monthly dues to pay for such commonly-shared amenities like added security, maintenance and recreational areas. Under a Florida law authored by State Senator Mike Fasano, when banks foreclose on a home, evict the occupant and then repossess the property, they also assume responsibility for maintaining the home and yard and paying homeowner or condo association fees and other expenses going as far as 12 months back and all expenses going forward. In many cases, however, banks are failing to upkeep the repossessed properties and to pay the HOAs their monthly dues. The banks' failure to pay the dues has dire consequences on the HOAs and the other homeowners within the community. The cost of maintenance of the common areas, the upkeep of the association and other bills that may come in has to be spread out among those who continue to live there and are paying their monthly maintenance fees. Otherwise, the community and the HOA will have to make do with less and cut back on expenses for such basic services as routine grounds maintenance, security and garbage collection. Consequently, this will drive the value of other properties in the community down.

Now, according to the CNN Money report, HOAs are putting liens on the repossessed properties until banks pay up and foreclosing on them if they do not. According to Solomon,  “The association has both a statutory right under the Florida laws as well as rights under its restrictive covenant in the community, and it pursues those rights just like any other owner.  In this legal scenario JP Morgan is no different than any other homeowner in the community who has failed to pay.”