Can my Homeowner’s Association (HOA) foreclose on my home?

HOA, Foreclosure, Homeowners Association, Bankruptcy

Florida Homeowner’s Association Foreclosure

Many borrowers that have stopped making their mortgage payments are unsure as to whether or not they should continue making payments to their homeowner’s association, commonly referred to as their HOA. My clients that are facing foreclosure often ask what the consequences are for not paying the HOA and are often surprised with my answer. With very few exceptions, I recommend paying your association in full and on time.

According to Chapter 720 of the Florida Statutes, a property owner that is at least 90 days late in paying HOA assessments may have his/her rights to common areas and association amenities suspended until the arrearage is paid. In addition, Florida law allows the HOA to charge a fine for each day the account is in default. Once the fines reach $1,000 or more, the HOA can place a lien on your property. Most HOA boards do not do this type of work themselves, so they hire an attorney to handle liens, collections, and foreclosures. These services can get very expensive and the statute allows the HOA to stick you with the bill. Nonpayment of these amounts can lead to the HOA filing a foreclosure against you and the property.

The HOA can foreclose on your property in much the same way as the bank. The HOA, like the bank, can also obtain a judgment against you for the unpaid assessments, fines, interest, and legal fees. The interest rate is set by the HOA bylaws. If the bylaws do not provide an interest rate, the statutory default rate is 18%.

Before the HOA can file a lien on your property they must make a formal demand for payment. This demand must meet the following criteria… First, they must provide you with 45 days to pay up on all amounts due (including attorney fees and costs). Second, the notice must be sent by certified mail and by first class U.S. mail.

If a tenant is renting the property while the foreclosure case is pending in court, the HOA is entitled to appoint a receiver to collect the rent and apply it to the delinquent assessments. Furthermore, the expense of hiring the receiver will be added to the final judgment amount if the HOA eventually prevails in the foreclosure.

If the bank holding the first mortgage gets title to the property through a deed-in-lieu of foreclosure or through a valid foreclosure sale, that bank will be responsible for paying all of the assessments accrued over the preceding 12 months or 1% of the original mortgage amount (whichever is less). This statutory requirement often pits the bank and the HOA against each other in cases where the HOA is desperate to complete a pending bank foreclosure so that they can collect fees, but the bank is bogged down with problems arising from their paperwork or other legal hurdles to completing the foreclosure. With that in mind, the HOA can apply pressure to the foreclosure case and potentially accelerate the sale.

In addition to the above mentioned reasons for paying your HOA assessments, it really is the right thing to do. The community or building and the people that live in it rely on the HOA for many important things such as insurance, maintenance, cleaning, sanitation, repair, landscaping, security, etc. When one or more residents stop paying the assessments, the remainder of residents must bear the burden on a pro rata basis. That is part of the rationale behind the statutory provisions that bestow so much power to the HOAs in Florida. Of course, it doesn’t hurt that the HOAs have a great lobby here in Florida.

If you are too far behind in your HOA payments and the HOA is unwilling to offer you a repayment plan that you can afford, Chapter 13 Bankruptcy may be an attractive option for you. Upon filing a Chapter 13 Bankruptcy, any collections or foreclosure activity on the part of your HOA (or any other creditor) is suspended. This will give you a chance to put together a repayment plan over 3 or 5 years or even strip off the association’s lien completely. Chapter 13 Bankruptcy is a relatively complex process and many factors must be considered prior to filing. However, under the right circumstances, it can be a tremendous tool for homeowners facing an HOA foreclosure.

If you have questions about HOAs, foreclosure, loan modification, bankruptcy, or other alternatives, please feel free to call my office at 888-886-0020, send an e-mail to emil@fleysherlaw.com, or complete the contact form below.

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