HOAs should work out payment plans with owners

Q: Which is better for the homeowners association, to own the homes that are in the process of foreclosure, or to let the bank hold on to them? And why?

A: It depends. There are a number of associations that are facing the problem where lending institutions are delinquent with their association assessments.

Boards and management companies should begin foreclosure actions against the banks and complete those foreclosures. There would be no mortgages to deal with and the community could sell the homes for market value.

As to individual homeowners, there are a number of factors to consider. If the lending institution is also foreclosing on the same homeowner, you would not proceed since the first mortgage has priority and the association will at least obtain nine months of past-due assessments once the lending institutions takes possession of the property.

If the bank is not foreclosing, and the homeowner has equity in the property, and it appears that the association could sell the home (where the mortgage balance is less than the market value) then the association should consider foreclosing. Most homeowners would probably not let their homes be foreclosed if they are current with their mortgages.

By taking a more aggressive approach, the foreclosure process would be a wake-up call for some delinquent owners.

If the mortgage balance is greater than the potential sales value of the home, there is nothing in the rule book that says an HOA can't take action against the homeowner in small claims court. If the community wins, it can attach wages and other assets.

However, in this economy, whenever possible, associations should try to work out payment plans with their homeowners, so that we don't have any more of our citizens losing their homes.

Q: I am the president of our HOA, Nuevo Vista, here in Green Valley (Henderson) and our management company's compliance plan includes liens for homes that do not comply with our covenants, conditions and restrictions. Is it true that if liens for violations (not assessments) are placed on homes that these liens do not have to be paid when the home is sold? I understand that liens for up to nine months of assessments and associated collection costs (to certain limits) are required to be paid when a home is sold.

A: A lien can be placed against a home for noncompliance of the governing documents. An HOA cannot foreclose on a fine unless the fine is one that violates health and safety.

In the cases where the lien is for a nonhealth and safety issues, the lien would just sit on that unit unless the homeowner tried to refinance or sell the house. The law does not require the buyer to pay off the lien, but the association could hold up the sales transaction by enforcing the payment of the lien by the seller.

This should not be confused with a foreclosure sale where the buyer would be required to only pay up to nine months of delinquent assessments.

There is one other priority, or super lien, that a buyer would have to pay and that is when the association has maintained a homeowner's property that was neglected by the homeowner.         

Q: The board of directors at my condo complex just decided to pull out our refrigerator in the clubhouse, which has been there for 14 years. The community's builder had given it to the community. All of a sudden the board said, "It was using too much electricity."

They took it upon themselves to remove it, without mentioning it. Don't they have to put this on an agenda in a general meeting with the community? They can just do things without the community consent? Also, at the last meeting, the treasure did not have the financial report. She said that she was out of town. Can this be legal that there was no report given at all in this meeting?

A: The removal of the refrigerator is not necessarily an item that would need to be on a board agenda. It may be good public relations to have informed the homeowners either in a meeting or in a newsletter. The 14-year-old refrigerator may not be in the best condition and really needed to be removed. At your next board meeting, you should ask when the board plans to purchase a new one.

As to the financial report, state law requires specific financial information to be on the board's agenda.

If the treasurer was planning to be out of town, she could have submitted the financial report to another officer. Technically, the fact that the treasurer's report was not given at the meeting would be a violation of the law.

Was there any other financial report given to the board members prior to the meeting. That would be an alternative to the formal treasurer's report.

Barbara Holland, certified property manager, is president and owner of H&L Realty and Management Co. To ask her a question, email support@hlrealty.com.