Dealing with HOA-foreclosed homes

Q: Know anything about “deed in lieu of foreclosure?” A homeowners association was in the latter stages of the foreclosure process against a homeowner in arrears for assessments and fines.

Suddenly, some financial institution steps in and files a deed in lieu of foreclosure. This institution paid off the assessments and collection costs. Does this type of deed act the same as a full-blown foreclosure and wipe away the possibility of us collecting fines (a legal gray area, we know)? Should we consider ourselves lucky in that we got collection costs? Do we have recourse for fines or are they washed away? As usual, thanks in advance.

One other item in question. In the process of a “conventional” sale, it’s our understanding that the buyer is issued a set of covenants, conditions and restrictions a minimum of five days prior to the closing. He signs a document at closing attesting that he was issued the CC&Rs and had the opportunity to review them prior to closing. What happens at a deed in lieu or a foreclosure (auction) transfer? Are CC&R’s anywhere in the mix? Is a doc is signed? If not, could that come back to bite the HOA in, uh, an anatomical area intended for sitting?

Sorry, one last thing. We’ve had a couple of foreclosures recently. There’s a rumor of a 60-day rescission period is afforded to the buyer? True or false? Is this possibly related to the buyer not recording promptly?

OK. I’m done.

A: A deed in lieu of foreclosure is a method whereby a homeowner has transferred ownership of her home to the lender. By accepting the deed in lieu of foreclosure, the lender has agreed the loan has been satisfied. No further action would be taken by the lender against the homeowner to pay off the loan. In your case, the association was able to collect the unpaid assessments and collection costs. Consider yourselves lucky. Trying to collect fines would probably cost the association more money in legal fees than the fines themselves. The association should reverse the fines on this home but if the violations still exist, the association has the right to begin the violation process against the new owners.

Nevada Revised Statutes 116.4109 pertains to the resale of homes. It was passed by the legislature in an effort to fully inform a potential buyer about the association, from its financial and legal status to the legal obligations of a homeowner. NRS 116.4101 section 2 states that a certificate of resale need not be prepared or delivered in cases of gratuitous disposition of a unit, disposition pursuant to court order, disposition by a government or governmental agency, disposition by foreclosure or deed in lieu of foreclosure.

You are correct in that in a sheriff’s sale of a home (as an example), the buyer may not be aware of their obligations to the association, unless she has reached out to the association for information. It would be a good idea for your association to provide the new owner with copies of the governing documents.

Finally, it is not a rumor. In 2015, the Legislature passed a 60-day right of redemption. This law allows both the homeowner or their lender to regain possession of the home by paying off the association.

A buyer of a foreclosed home must take extra precautions because of this right of redemption. This new law will definitely delay any sales of an association’s foreclosed homes.

Barbara Holland is a certified property manager, broker and supervisory certified association manager. Questions may be sent to holland744o@gmail.com.