Are You Responsible For HOA Fees After a Foreclosure

If I am trying to sell my condo as a short sale in Costa Mesa, and I have stopped paying the mortgage, am I still responsible for HOA fees after a foreclosure?

 

Great question! Thanks readers for sending this one into CostaMesaRealEstate.com. So Are You Responsible For HOA Fees After a Foreclosure???

 

There is a great deal of confusion among Realtors and the public on this topic. It involves two different ideas- A lender has a lien on your a piece of your condo with their mortgage. A Homeowners Association (HOA) has a right to place a lien on your condo for past due HOA fees, and should the lender foreclose, those liens are wiped out. However, a lien and a debt are not the same. The HOA actually has the right to collect on a past due debt (if you stopped paying the HOA dues) and come after you for the debt and any associated fees with attempting to collect the debt (attorneys, past due fees, additional assessments).

 

The past due HOA dues are a debt (and according to the attorney my client and I consulted with), and they are actually a personal debt. If the HOA filed a lien against the property, that is a way to acquire a security interest in the property in an attempt to collect the debt. So a debt is a promise to pay and a lien is a security interest in some real or personal property, sometimes also referred to as collateral, which can be liquidated to pay the debt if you don’t.

 

Now, when a lender forecloses, they wipe out all junior liens against the property. In other words, the junior lien holders (which the HOA lien probably, although not certainly) can no longer sell your home to collect their debts.

 

What most people don’t understand is, just because the lien was wiped out, the debt still stands. This is the case for Costa Mesa real estate 2nd trust deeds also. If the HOA wishes to collect the debt, they can attempt to do so themselves, hire a collection agency, or take you to court. Even if you don’t have any money now, they have the right to come after you for the debt later. YES, really!!! (For how much later, and lots of other deeper answers you should contact an attorney.)

 

The good news is – from the date the bank foreclosed, they are now the owner. They owe any HOA dues and assessment after the foreclosure date.

 

So many people get bad advice, because they think if the lien is wiped out, so is the debt. In a Costa Mesa short sale, you have the opportunity to negotiate away the debt. In a foreclosure, unfortunately, you don’t. Again, I really advise you to speak to an attorney. However, if you owe the money you might be able to negotiate for a smaller amount now rather than wait until you get sued and end up paying not only the delinquent HOA dues, but all the HOA’s legal fees too.

 

Need an expert to deal with a Costa Mesa short sale? Contact Colin Delaney at (714) 743-9882 for a private consultation on your situation.