Pay and Stay – A Better Option for Homeowners in Foreclosure

Some homeowners in HOAs and Condo Associations are in foreclosure because they cannot pay the assessments. Some have simply walked away because their loan is way “upside down”. I am speaking now to those who aren’t just “walk aways” but who lost jobs, income, had health issues or the like.

I spoke with a client on a consultation recently who received an unexpected surprise, a bill from an HOA for about 10 months of assessments and collection costs that accrued between the date the lender provided for the foreclosure sale, and the date the property actually sold. This client said “I wish I had spoken to you about 10 months ago.”

When this owner left the association because he could no longer pay the mortgage, he did pay the assessments that were due up to the date on the Notice of Trustees sale, in other words, the date set by the lender for the sale.

He did not understand that he was on the hook for the assessments after that date. However, the lender postponed the sale a number of times and so it took 10 months to get sold! (Yes, they can do that.) Some properties are taking 18 months or more. And no, the lender does not have to let you know if the sale is postponed. It can happen as late as the day of the sale. (The same is true if it is the association that is foreclosing.)

So his comment about wishing he had talked to me before was based on the fact that he had been paying rent for a place to stay that was more than the association’s assessments. Now he is on the hook for the assessments anyway, plus the collection costs.

So this is certainly worth thinking about. If the bank is foreclosing, that does not mean you should stop paying the homeowners association fees. Stay and pay! It makes sense. Otherwise, you may get an unpleasant surprise someday such as a very big bill when you think the whole horrible experience is behind you. And do you know what a worse surprise would be? A “squatter” moves in and either falls down the stairs looking for a patsy to sue, or looking to establish the illusion of ownership rights places a tenant, collects a security deposit and a month or two or more of rent, and moves on to another empty foreclosure home.

It happens.

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2 Responses to Pay and Stay – A Better Option for Homeowners in Foreclosure
  1. Lourdes
    April 20, 2010 | 8:22 pm

    Hi. How long can a condo owner go without paying monthly hoa fees before a lien can be placed on his unit?

    • Beth Grimm
      April 21, 2010 | 4:59 am

      It really depends on what the association’s collection policy says about what letters or warnings or timeframes come before the lien. However, I would say that the policies commonly call for a lien to be placed when the account is about 60 days delinquent. A “pre-lien” letter as prescribed by law in Civil Code Section 1367.1 must precede the lien.