Foreclosure in Seattle>Question Details

jeng7400, Home Buyer in Seattle, WA

Do past HOA dues carry over to new owner of a foreclosed home?

Asked by jeng7400, Seattle, WA Sat Jun 15, 2013

Can an HOA collect previous years of past dues from the new owner of a house that was foreclosed on by the bank? Does the foreclosure automatically wipe out all past dues and does the bank have to formally notify the HOA of this? No physical lien was ever recorded but HOA says a lien is automatically created by their covenants. New owner was issued title with no mention of CCRs.

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This is a legal question and you don't give enough information for even an experienced real estate attorney (which I am not), to answer the question. So you will need to consult a real estate attorney to get the answer for your specific situation.

That said, there are some HOA type liens which have priority over a recorded deed of trust which would survive a foreclosure. Of the ones I'm aware of, those are usually of limited duration, such as perhaps the most recent 6 months dues, and they may not require a recorded lien document be filed.

As to the not enough information statement above, one element of that (but not the only element) is that you don't state whether the property was bought directly at a foreclosure sale, or after the bank bid at the sale and listed the property as an REO transaction. In the latter case the liens should have been paid at closing, absent some language in the purchase sale contract to the contrary.

Finally, you should also talk to an attorney about the lack of listing the covenants in the title report. There might possibly be some claim against the title company for that which goes beyond the amount of the past due dues. This assumes you actually obtained title coverage, as opposed to simply seeing the title commitment that the bank obtained to do the foreclosure. That type of report might not mention the covenants because it's designed more to let the deed of trust trustee know who to give notice to of the foreclosure.
0 votes Thank Flag Link Sat Jun 15, 2013
I am no lawyer. But my experience and understanding of the law from having purchased foreclosure condos at auction is that the new owner can be held responsible for up to 6 months of past due HOA dues in the State of Washington.
0 votes Thank Flag Link Wed Apr 9, 2014
I am no lawyer. But my experience and understanding of the law from having purchased foreclosure condos at auction is that the new owner can be held responsible for up to 6 months of past due HOA dues in the State of Washington.
0 votes Thank Flag Link Wed Apr 9, 2014
I am no lawyer. But my experience and understanding of the law from having purchased foreclosure condos at auction is that the new owner can be held responsible for up to 6 months of past due HOA dues in the State of Washington.
0 votes Thank Flag Link Wed Apr 9, 2014
I am no lawyer. But my experience and understanding of the law from having purchased foreclosure condos at auction is that the new owner can be held responsible for up to 6 months of past due HOA dues in the State of Washington.
0 votes Thank Flag Link Wed Apr 9, 2014
@Kary and @Ray, thanks much for your replies. My main query was whether the new owner would be liable for past-due dues, regardless of whether CCRs were mentioned on title. That is, if a lien is filed against the new owner, would he/she have to pay it? Ray seems to suggest not. Yes, will consult with an attorney. In short, though, the cost of hiring an attorney to contest the lien wold be more than the total of the past dues :-)
0 votes Thank Flag Link Sat Jun 15, 2013
What Kary said.....a good HOA will keep order around the condo and preserve your property value. Bad HOA's are a nightmare for everyone.

If, in fact, the HOA has assessed fees in the range of $25 for six months, then you might consider paying the debt in order to resolve it but include a letter to the HOA that you are paying the assessment 'under protest'. It's unlikely you'll never encounter this problem once the debt is resolved.

If you go the legal route, most attorney's bill out around $475 an hour and up. It's just not worth the expense if the amount owing is so small. Good luck, whatever your decision.
Flag Sat Jun 15, 2013
The cost of an attorney would probably be an issue, especially if this is only six months at $25 a month. For that amount though you could call the escrow and see if they would cover it.

The more interesting issue to me is being subject to an HOA if you were possibly not told about in the title report. I like HOAs and specifically looked for an active HOA when we bought. But other people hate HOAs. I'm not sure how a title insurance policy would cover that type of issue, if at all.
Flag Sat Jun 15, 2013
Ray, make sure you read the replies to my second post, which are somewhat hidden below. Your assumption was correct that Jeng bought at an REO. I suspect the past due dues issue can be straightened out, perhaps even by the escrow. But that would still leave the issue of having to pay future dues and being subject to rules that were possibly not disclosed in the title commitment or policy. Those are very interesting issues that I have not ever addressed before and should be addressed by a real estate attorney.
0 votes Thank Flag Link Sat Jun 15, 2013
Kary has covered all the bases here. You should consult with a real estate attorney at this juncture. Real estate agents are not qualified to advise you on legal matters. This demonstrates why you should always seek professional help from an experienced Realtor, or an attorney, when purchasing real estate. Especially if the property is distressed or in foreclosure. What you save in Realtor fees upfront, may be paid many times over in a future legal battle after the sale is closed.
0 votes Thank Flag Link Sat Jun 15, 2013
Jeng, Ray can correct me if I'm wrong, but he is seemingly assuming that you bought through an REO transaction. As I mentioned, the result can be different if you bought directly at the trustee's sale.

If you did buy at the trustee's sale I'm curious whether you did actually take steps to get a title policy issued, as opposed to just reviewing the title policy issued to conduct the foreclosure. It's an issue I've been working on lately, so I'd appreciate a response. And if you did get a policy, was it a "Homeowner's" policy or the lower grade "Owner's" policy.
0 votes Thank Flag Link Sat Jun 15, 2013
Kary, looks like I was supposed to get a standard ALTA Owners Policy. Still trying to locate the actual policy so I can see what "exceptions" were listed. Seems to me escrow should have checked to see if there was an HOA and any outstanding assessments.
Flag Sun Jun 16, 2013
Jeng, I thought I should let you know I don't get any notice of these replies to posts, as opposed to the main posts responding to the question. So if you post something as a reply to my post after today I likely will not notice it. After today please post as a reply to your main post.
Flag Sat Jun 15, 2013
I just checked a recent preliminary commitment, and it has an exception which reads: "Provisions of the Articles of Incorporation and By-Laws of the [Fictitious Name] Home Owners Association, and any tax, fee, assessments or charges as may be levied by said association." So the title company is not agreeing to cover such items, but that item would let the escrow know to contact the HOA regarding dues. Again though, keep in mind I am not a real estate attorney. They would have more experience dealing with situations like this. I have not seen this happen in the past.
Flag Sat Jun 15, 2013
The escrow agent would look at the preliminary commitment from the title company. They might also ask the listing agent if there is an HOA. Again, that is my experience--you should discuss this with a real estate attorney.
Flag Sat Jun 15, 2013
@Kary, thanks for your response. What do you mean by this phrase:
"...but if the covenants were not listed then the escrow would not know to contact them." How or where would an escrow agent look to see if covenants "were listed"?
Flag Sat Jun 15, 2013
Jeng, thank you for responding. FYI, the way they learn of the past due assessments is for the escrow agent to actually contact the HOA, but if the covenants were not listed then the escrow would not know to contact them.

Again, some liens survive the foreclosure. So let's assume 6 months of dues survived, that amount should have been paid at the time of sale to you, again absent some contrary provisions in your purchase and sale contract (bank contracts are not necessarily typical--particularly for Ocwen and HUD properties). And you're right, the bank should have been paying any dues after that point, but the six months in dues would still remain. My guess is this will be covered by your title policy, or that the bank will go back and pay the amount, but you will still likely need to consult an attorney.
Flag Sat Jun 15, 2013
Kary: The house was bought through an REO transaction from the bank, not at trustee sale. I am looking through my files to see if I can find the title policy. I know I received the final settlement statement and it made no mention of HOA or CCRs. Again, a physical lien was never recorded. How could the bank or title company have known there were outstanding dues? Moreover, wouldn't those dues ave been wiped out by the mortgage foreclosure, meaning the bank would only have had to pay HOA dues starting from the time it took possession, not the previous years?
The HOA covenants have only one line addressing liens. Under Duties of the Board of Directors, it includes:
"foreclose a lien against any property for which assessment are not paid within 30 days past the due date"
Flag Sat Jun 15, 2013
The debts of another person are not your responsibility. The Seller should have satisfied all liens prior to closing, and you should have inherited a 'clean' title. You may have a claim against your title insurer if you were not provided with all HOA documents, or a lien was not disclosed to you before closing . Prior to closing, you should have been given a copy of the title report which would have included all pertinent recorded documents. I recommend that you review your HOA documents and then get in touch with an attorney that specializes in real estate law. Good luck.
0 votes Thank Flag Link Sat Jun 15, 2013
What are your thoughts on this: A Short Sale we are involved in requires over $10,000 in unpaid HOA dues that were never paid by the seller that we have to pay. Is there any legal recourse on this?
Flag Tue Jan 7, 2014
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