Homeowners Associations Foreclosing on Homes

[jive1]

This is from http://www.npr.org/templates/story/s...078864&sc=emaf

Not So Neighborly Associations Foreclosing On Homes
by Wade Goodwyn

June 29, 2010
Capt. Mike Clauer was serving in Iraq last year as company commander of an Army National Guard unit assigned to escort convoys. It was exceedingly dangerous work — explosive devices buried in the road were a constant threat to the lives of Clauer and his men.

He was halfway through his deployment when he got a bolt from the blue — a frantic phone call from his wife, May, back in Texas.

"She was bawling on the phone and was telling me that the HOA [homeowners association] had foreclosed on our house, and it was sold," he says. "And I couldn't believe that could even happen."

Clauer had a hard time understanding what his wife was saying. His $300,000 house was already completely paid for. Could it be possible that their home was foreclosed on and sold because his wife had missed two payments of their HOA dues?

In many states it is not difficult for an HOA to foreclose on a member's home for past dues even if the amount owed is just a few hundred dollars.

"I was really in a hurry trying to get home before my family was living on the streets," Clauer says.

Sold For A Steal
But by the time he got back to Texas, it was too late. The Clauers' four-bedroom, 3,500-square-foot home had been sold on the courthouse steps for just $3,500 — enough to cover outstanding HOA dues and legal costs.

The new owner quickly sold it for $135,000 and netted a tidy profit.

"Basically it's everything to us," Clauer says. "Having a house like this paid for was huge for us, for our retirement plans. We thought we were so far ahead, and now it's like we're starting from the beginning."

Clauer's $300,000 home was completely paid for when his HOA foreclosed on it because his wife had missed two association payments. The 3,500-square-foot home was sold for $3,500 on the courthouse steps.
Lawyers for the HOA say that while Clauer's case is regrettable, it was his and his wife's fault for not paying their dues in a timely manner.

"The fact of the matter is, the laws of the state of Texas allow the homeowners association to file assessment liens on properties who haven't paid their assessments, and they also allow foreclosure on those liens," says Patrick Whitaker, who represents the HOA. "And the homeowners association followed the letter of the law."

Beg For Mercy
And in 33 states, an HOA does not need to go before a judge to collect on the liens.

It's called nonjudicial foreclosure, and in practice it means a house can be sold on the courthouse steps with no judge or arbitrator involved. In Texas the process period is a mere 27 days — the shortest of any state.

David Kahne, a Houston lawyer who advises homeowners, says that in Texas, the law is so weighted in favor of HOAs, he advises people that instead of hiring him, they should call their association and beg for mercy.

"I suggest you call the association and cry," he says.

If a homeowner misses a couple of association dues payments, the $250 or $500 they owe often becomes $3,000 after the association's lawyers add their legal fees, Kahne says.

It's not the HOA that has to pay the lawyer's bill but the delinquent homeowner. If the homeowner wishes to contest and loses, the owner is on the hook for legal fees that could run deep into the tens of thousands of dollars.

Kahne says that as the economy has gone under, HOA management companies and lawyers have been making millions off homeowners through this foreclosure process.

"We're having literally thousands of lawsuits filed over very small amounts of money," Kahne says. "And those very small amounts of money rapidly become large amounts of money when the association attorneys add their bills."


Suddenly faced with a demand that they pay $3,000 immediately or lose their home, many disbelieving homeowners don't know where to turn.

With the recession, foreclosure filings for delinquent HOA assessments in Texas have increased from about 1 percent of all home foreclosures to more than 10 percent currently, according to the industry.

'Won't You Be My Neighbor'
Over the past 20 years, HOAs have exploded across Texas. While there are 1,100 municipalities, there are now 30,000 HOAs. And these associations have far more power to take away a citizen's home than any city or county in Texas.

The perception that the balance of power has swung too far toward HOAs has begun to permeate the Texas Legislature. Reform legislation has passed the Texas House of Representatives, but no bill has been able to make it through the state Senate.

Basically it's everything to us. Having a house like this paid for was huge for us, for our retirement plans. We thought we were so far ahead, and now it's like we're starting from the beginning.

"Associations are a collection of neighbors," says Republican state Sen. John Carona, who represents Dallas. "The goal has to be to work well together — have a harmonious community — and to create a lifestyle that people enjoy and want to be a part of."

In addition to representing Dallas, Carona owns the largest HOA management company in the country — Associa, which has more than 100 offices, 6,000 employees and 7,000 HOA clients in 30 states and Mexico.

Carona defends the rights of HOAs to foreclose for delinquent dues, even for small amounts.

"If an association did not have a means, a forceful means, to collect that money from any homeowner who, for whatever reason, couldn't pay, it places an unfair burden on every other owner in that association," Carona says. "And a burden, quite candidly, that those other members didn't bargain for."

There have been complaints that some members of HOA boards have bought HOA-foreclosed properties for a pittance, and then sold them for a hefty profit.

In Texas, there are no laws to prevent this. Carona says the best way to address this apparent conflict of interest is not by passing new state laws but by letting the HOAs handle it internally through modification of the association's constitution.

"I think that an association can avoid that type of thing by adopting conflict-of-interest rules," he says.

Closing Loopholes
Republican state Rep. Burt Solomons from North Texas has been trying in vain to pass HOA reform legislation. He says during state legislative hearings there was no shortage of outraged homeowners, but he acknowledges that the HOAs, their property management companies and their lawyers fought back effectively.


Pending a legal case, Clauer, his wife, May, and his daughters, Kirsten and Kamryn, are still living in the home that was foreclosed on.
Solomons says HOA board members and advocates testify and say, "'We need the power to access and fine and foreclose, and we need the money. And we look for people in violation of the rules and restrictions that we put in place.'"

"And they drive around in golf carts looking for them," Solomons says.

In theory, HOAs are only supposed to foreclose for nonpayment of dues. But Solomons says that through a loophole in Texas law, in practice, HOAs can foreclose for nonpayment of HOA fines, too. Solomons watched with frustration last year as his reform bill died in the Senate.

Legal Recourse
As for Clauer, he's gone from fighting in Iraq to fighting his HOA in Texas. And if he weren't in the military, Clauer would have no legal recourse at this point.

But in a spasm of gratitude in 2003, Congress passed the Servicemembers Civil Relief Act, which was supposed to prevent nonjudicial foreclosures against military personnel fighting overseas.

"Hopefully we're going to get the house back," Clauer says. "That's what we're fighting for — that the judge will understand that this was illegal. That the HOA can't do what they've done."

If a federal court decides in favor of the Clauers, the foreclosure and subsequent sales of their home would have to be unwound and the deed returned to them. If they lose, the captain's nice, paid-for, suburban home would be lost to his family forever. The case goes to court early next year

This is crazy. And the fact that the same people who assess fines and collect dues are able to buy the homes for pennies and sell them for a profit is just absolutely wrong.

[Thunderscreech]

I think we need a federal ban on Homeowner's Associations...

but, regardless, this is effed up. A guy who puts his life on the line for those pigs deserves better.

[elgecko]

That's a bunch of BS. I'll stick to mowing my own lawn.

[DigMe]

Horrible.

bc

[XigXag]

I heard this story on NPR. Absoloutely disgusting. A pox on the HOA's.

[jive1]

Originally Posted by elgecko

That's a bunch of BS. I'll stick to mowing my own lawn.

They usually don't mow your lawn. You pay them money to go around and make sure you mow your lawn. According to the article, a HOA can foreclose on a home for unpaid fines. So someone on the board wants your house. He levies a fine for your grass being too long. You contest, but during the time you are seeking recourse, the fines build up and then they foreclose on you. The guy on the board buys the house for a pittance like $500, and then sells it to another guy on the board for $100,500 who then sells it on the open market for $200,000. 100,000 reasons to screw your neighbor, and you won't go to jail for it.

[elgecko]

Originally Posted by jive1

They usually don't mow your lawn. You pay them money to go around and make sure you mow your lawn. According to the article, a HOA can foreclose on a home for unpaid fines. So someone on the board wants your house. He levies a fine for your grass being too long. You contest, but during the time you are seeking recourse, the fines build up and then they foreclose on you. The guy on the board buys the house for a pittance like $500, and then sells it to another guy on the board for $100,500 who then sells it on the open market for $200,000. 100,000 reasons to screw your neighbor, and you won't go to jail for it.

I know, it's aggravating!

I just can't see the appeal of owning a condo...but maybe I'm too busy painting my house bright orange, letting my grass grow too long, and installing a satellite dish.

[NickInMesa]

Yeah, HOAs are nazis. My wife and I moved to an acre lot with no HOA. We have a dirt road. We've got blue street signs (meaning private road in AZ).

One pissed me off because I kept parking my 3rd car in my street. We have 3 cars because 2 are personal, 1 is business. We had a 2-car garage. They kept sending me letters.

Well, that was when cameras still had film, I bought a 36 print roll, popped it in the Nikon and made sure I filled the darn cameras with photos showing all sorts of things to be done around the community.

Some of the stuff was messy. Broken sprinklers. Cracked street. Etc... With a nasty comment on the back of each photo. Sent the photos, kept the negs just in case. Never heard from them again.

[jive1]

Originally Posted by elgecko

I know, it's aggravating!

I just can't see the appeal of owning a condo...but maybe I'm too busy painting my house bright orange, letting my grass grow too long, and installing a satellite dish.

My mom owns a condo, and at least with her fees she has her utilities covered, use of the pool, snow shoveling, gutter cleaning, roofing maintenance, lawn mowing, and leaf removal. Compared to some HOA fees I've seen in some neighborhoods, she's getting a bargain and actually getting services in return for her money.

[TheSuzie]

I can't believe (actually I can) they did this to one of our servicemen and his family. The folks who took their place should get spanked but good.

I just finished reading about 25 pages of covenants on some land I wanted to buy. I am trying to find a place where I can put up a simple dwelling or a special made small mobile home so I won't have to be homeless again,

This is isolated rural land and many of the restrictions make sense but others make it sound like this is some suburban tract house subdivision. Heck most of the parcels are 30-40 acres and the smallest allowed is about 5 acres. Still they have managed to set it up such that I can't afford to build according to their rules.

There is no active association but any owner or group of owners can take legal action against a violator. I can't afford to be on the receiving end of something like that just because someone doesn't like me or wants to force me out an get my land cheap.

I keep running into this stuff everywhere I look.

Bah! Humbug!

[MakiSupaStar]

Criminal

[Stumbo]

While the HOA's followed the "letter of the law", the law has problems with it. I suspect the HOA board and the lawyers visit a house of worship regularly. How do they sleep at night?

[TheSuzie]

Originally Posted by Stumbo

While the HOA's followed the "letter of the law", the law has problems with it. I suspect the HOA board and the lawyers visit a house of worship regularly. How do they sleep at night?

Ambien.

Seriously, these are the same lawyers and boards who make up the association rules. These rules are often huge documents set up so the owners will end up breaking rules just by trying to live. It reminds me of the credit card agreements that had universal default clauses along with fees and penalties for everything.

I don't know who came up with the non-judicial foreclosure thing but from their point of view it was a stroke of genius. Many of these folks are bottom feeders dressed up as high class because they have a few stolen dollars to throw around. Don't get me started.

Peace,
S

[TortillaChip520]

WHHHAAAT?!?!

When I have to deal with an HOA someday... God help them.

[drteeth]

This is just insane. Criminal. Disgusting.

[Relic]

I hate the whole HOA thing. It really borders on criminal. My parents-in-law have to deal with an HOA where they live and the stuff they tell me really just makes me want to kick the crap out of somebody...
We're house-hunting at the moment and that's one of those things that's makes me instantly rule out a house. NO HOA's.

[Thunderscreech]

If I knew I could get away with it without losing my house, I would troll the bastids to no end. Of course this only works in the reality that is Thunderscreech's mind...

I don't really understand how they can legally do this. But then again I guess you're not supposed to.

[Jonyak]

thats just messed up.

I am disgusted.

[Philbiker]

Regrettable situation. HOAs are usually a good thing; one of these days I'll volunteer for my local HOA. I've been saying that for years.

I'd love to hear the HOAs side of the story; that NPR piece seems pretty one-sided

[Thunderscreech]

Originally Posted by Philbiker

Regrettable situation. HOAs are usually a good thing; one of these days I'll volunteer for my local HOA. I've been saying that for years.

I'd love to hear the HOAs side of the story; that NPR piece seems pretty one-sided

You are correct, usually. But I think the HOA's side of it is best chalked up to just straight greed. After all, what other motive can you find?