MANATEE COUNTY — It’s become a recurring lament in the East County: A homeowner loses a job, falls behind on his or her mortgage and eventually surrenders it to the bank.
Many times, the homeowner owes tens of thousands of dollars in back payments — a hole too deep to conquer in this economy.
But what if the amount owed is just a few hundred dollars? And what if it isn’t owed to a mortgage lender but rather the resident’s homeowner’s association?
Since Jan. 1, East County homeowner’s associations have filed 13 notices for a foreclosure action in Manatee County. Of those, nine were filed by the Greenbrook Walk Condominium Association, two were filed by the Mote Ranch Homeowner’s Association, and one each was filed by the Palm-Aire at Sarasota Condominium Association “C,” Heritage Harbour Master Association and the Waterlefe Master Property Owner’s Association.
HOA officials and their attorneys say the measure is one of last resort. Residents facing HOA-instigated foreclosure call the action pitiful.
One homeowner’s plight
Victoria Bolduc’s struggle with the Kingsfield Lakes Homeowner’s Association began as $345 in late HOA assessments.
When it’s done, her total amount due — including court costs and attorney’s fees — will total nearly $2,700.
According to Bolduc, she didn’t learn of the unpaid dues until she received a letter dated June 4 threatening a foreclosure action on her home. The HOA could file to foreclose on her four-bedroom home if she doesn’t pay in full by Sept. 15. To date, she’s paid about $1,700 of nearly $2,700 owed.
“My option is to pay the bill or lose my house,” said Bolduc, 56. “That is my (only) option. I hate to see anybody go through this.”
Bolduc, who is disabled, lost her husband in August 2008 after he drowned accidentally. Now, Bolduc owes $1,019 and said she must find a way to come up with the money.
“I want people to know that this is happening,” Bolduc said. “I can’t even imagine what they are doing to these people who have no idea what to do.”
Mary Hawk, the attorney representing cases for the Kingsfield Lakes Homeowner’s Association and others, said she could not comment specifically on Bolduc’s case, but most homeowners facing foreclosure contact her office to develop a payment plan, which usually gives homeowners three to six months to pay off the debt. The other option is to file a qualifying offer, which, if accepted, gives homeowners 60 days to pay.
“The associations almost always prefer to work with the client and get payment instead of foreclosing,” Hawk said.
Letter of the law
Florida law does not have restrictions for an HOA in terms of how much a homeowner must owe before it can file a lien and a subsequent foreclosure action. Florida Statute 720 section 3085 states the HOA may bring an action in its name to foreclose a lien for assessments in the same way a mortgage of real property is foreclosed. The HOA also is entitled to recover reasonable attorney’s fees incurred by the action.
Attorney Scott Petersen, of Lakewood Ranch-based Becker & Poliakoff, represents numerous HOAs and condominium associations in Manatee and Sarasota counties. He advises clients to use every means possible to collect assessments before taking legal action. In total, each foreclosure action costs HOAs up to $3,500 in attorney’s fees, court costs and other expenses. But in many cases, that amount is minimal compared to what is owed, and HOAs are finding themselves in precarious financial situations.
In some cases, HOAs are owed tens of thousands of dollars — most often because dues for properties undergoing bank foreclosure are not paid. Even if a bank foreclosure drags out for two years, banks only are forced to pay 12 months of delinquent HOA assessments or six months of delinquent condominium association assessments.
“In this area especially, homeowner’s associations don’t want to foreclose on homeowners,” Petersen said. “The perception is that it looks bad if communities begin filing lawsuits. Many (HOAs) have waited a long time before taking action.
“Their ultimate aim is just to get paid,” he said. “They really don’t want to take title of that unit.”
A growing problem
Petersen said in the last month, his office has seen an increase in HOAs and condominium associations starting to move forward with the foreclosure process.
Hawk, the attorney representing Kingsfield Lakes, echoed Petersen’s sentiments, noting that although HOAs hesitate to foreclose on homes, they also have to send the message that they are serious about collecting.
“A lot of (the HOAs) are finding they feel like they have no choice,” she said. “These boards don’t want to own these properties. They just want to be paid.”
David Muller, co-executive director of the Community Association Leadership Lobby, said his statistics statewide show there were four times the number of bank-initiated and HOA-initiated foreclosures when comparing a year’s worth of data collected on October 2007 to data collected on October 2008.
In 2009, results from an online survey among CALL members solicited more than 1,500 responses from property owners between Jan. 15 and Feb. 1. Sixty-five percent of respondents, of which 75% were on an HOA board, said foreclosures in their communities left revenue shortfalls after the second half of 2008. Fifty-seven percent of respondents statewide said they had difficulty collecting overdue assessments from mortgage lenders that had been slow to foreclose, and more than half of respondents reported their HOAs were taking steps to reduce expenses, most commonly by increasing monthly fees on the remaining property owners.
“The foreclosure in community associations are crippling the functionality of these associations,” Muller said.
Working for a solution
Ken Garber, president of the Mote Ranch HOA, said his association has filed foreclosure motions on only one home this year. In each case, the HOA has tried to work with homeowners to correct the problem, and they have had a 50% success rate.
“We send them a letter if they are late on payments,” Garber said. “They get six weeks to pay or they can call the management company to make arrangements.”
In cases where homeowners are able to pay delinquent assessments, Petersen said HOAs and attorney’s offices work with them to create a payment plan so they are not continually delinquent on their fees and accruing more penalties. In some cases, HOAs have even reduced late fees, and attorneys have reduced costs to help minimize expenses for proactive homeowners.
However, homeowners who get a pre-foreclosure notice and simply throw a one-time payment at the situation are not resolving the problem. Often, they are still garnering interest and other fees, which would allow the foreclosure action to move forward, Petersen said.
HOAs that foreclose on properties do not have to pay the mortgage on the home, which usually triggers a foreclosure action by the bank. In those situations, Petersen said some of his clients are renting out units as they wait for banks to foreclose on properties.
“If the bank takes a year, that’s a year’s worth of rent (that can pay for overdue assessments),” Petersen said.
Contact Pam McTeer at firstname.lastname@example.org.
THE FORECLOSURE PROCESS
According to Florida Statute 720, an HOA may file a claim of lien to secure payment for overdue assessments. The HOA also may bring an action to foreclose a lien for assessments in the same way in which a mortgage of real property is foreclosed and may bring an action to recover a money judgment for unpaid assessments without waiving its claim of lien.
To move forward with a foreclosure action, an HOA must first notify the homeowner in writing. The action to foreclose a lien may not be brought until 45 days (or 30 days in cases by condominium associations) after the homeowner has been notified.
At this point, the parcel owner usually contacts the attorney’s office to come up with a payment plan. However, by law they also may make only one qualifying offer for payment during the pendency of a foreclosure action. The parcel owner then must deliver a copy of the filed qualifying offer to the HOA’s attorney by hand with a written receipt, or by certified mail with a return receipt requested.
The parcel owner’s filing stays the foreclosure action for the period stated in the offer, which may not exceed 60 days following the date of service of the qualifying offer.
Payments received and accepted by the HOA must first be applied to interest accrued, then to any administrative late fee, then to any costs and reasonable attorney’s fees and then to the delinquent assessment.
If a foreclosure action does go forward, the foreclosure sale is not finalized until 10 days after the sale, after the certificate of title has passed.
Victoria Bolduc is setting up the T W Kinney Foundation, a non-profit foundation for the permanently handicapped and minority home and business owners to apply for a bridge grant. She said she hopes to help people avoid a situation like hers.
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