https://www.youtube.com/watch?v=vCFLY-ENm38&t=9s
After 17 years of living in her Green Valley Ranch home, Monica Via says her family was kicked out 3 weeks ago. Then a new owner showed up. Imagine losing your home over just a few hundred or a few thousand in unpaid fees. Homeowners in this country are facing the surprising threat of losing their most valuable asset. I'm talking about the alarming trend of HOA foreclosures. In this video, I'm going to tell you about how these HOAs are foreclosing on properties. I'm going to share some stories of some people who literally lost their homes due to an HOA foreclosure, and I'm going to talk to you about some states that are actually stepping up and changing laws to limit the power of these HOA foreclosures. So, I'm hopping mad about this one, guys, so let's get started.
So in researching foreclosure news and all the things I come across, this trend of these HOA foreclosures. It is mindblowing how HOAs are literally taking people's homes from them over a mere few thousand of unpaid fees and even assessments or fines, and yet the house has been foreclosed on by the HOA. How is that possible? Oh, it's possible, and I'm going to explain to you how this whole thing comes about. It's pretty scary.
Now, let me get into how these HOA agreements work. Okay, so an HOA, also known as a Homeowners Association, is a body that enforces a community's rules. Right, so a lot of new communities that are being built these days, they will have an HOA, and you're going to pay, you know, a few hundred a month or it could be an annual fee. When you're paying those fees, you're also agreeing to that HOA's rules, also known as CCRs. CCR, that's also known as covenants, conditions, and restrictions. This is the actual agreement that you're going to sign at closing, and this outlines what the HOA can or can't do or enforce. Some HOAs do have clauses in those CCRs that allow them to pursue foreclosure if you miss any payments, and the CCR should typically outline how the HOA will proceed with the foreclosure process.
So what triggers an HOA to foreclose on one's home? It's basically triggered by a failure to pay your dues, right? So your monthly or annual dues, any assessments, or if there's any fines, cuz we know how HOAs like to slap fines on people over the stupidest things. So yeah, failure to pay those can trigger these foreclosures. What happens is if you fail to pay your HOA fees, the fines, what have you, the HOA will then place a lien on your property. Now that lien is used to discourage the sale of a property to either a potential buyer or even to a mortgage company. It's basically saying that there is a debt issue on your property. Once that lien is filed, the HOA can then pursue a foreclosure and force the sale of that property. In order to remove the lien from the property, you must settle the debt with the HOA. If you're unable to pay those past-due fees to the HOA and your property foreclosed upon, in some states, you will be allowed to buy the property back by settling the past-due fees.
Now here in New Jersey, this is an interesting fact that I found out: an HOA foreclosure takes precedence over a mortgage foreclosure. Can you believe that? It's true. If a mortgage foreclosure is already underway on your property, and then all of a sudden, the HOA is going to foreclose on your property, that mortgage foreclosure becomes secondary. Who gave the HOA all the power to be ahead of the bank? The bank gets in line, or second. Are you kidding me? That was a little bit insane. I understand there's probably in some cases where, you know, there are people that owe thousands and thousands of dollars in, you know, past-due fees and fines, what have you. Understand it, but there are some stories I'm going to share with you right now where some people were just past due by just a mere few thousand, and the HOA foreclosed, and they sold their homes right underneath them without any notice. That's crazy. That's the other thing that gets me on this: they're not even telling people when they're past due, and then they're turning around and selling their home. They're foreclosing and selling it. This is ridiculous, so check these stories out.
So the first one that I have here: there was a service member, a gentleman who served in the Air Force. This is back in 2022. He owed $2,500 in HOA dues, and they foreclosed and sold his house. I'm not kidding you. So this gentleman, Air Force Master Sergeant Christopher Bando, had to go overseas, right? He had to go serve in Turkey for 15 months. So when he left, he set up his automatic payment from his bank to pay his HOA dues. Well, something happened; there was a glitch, and the payment stopped coming to the HOA. So he gets back after 15 months to find out his house was foreclosed upon and the property was sold over $2500 in past-due fees. Are you kidding me? Why would you do that, and why are we not giving notice to the homeowners? Work out a payment plan, too; let them know, hey, you're past due. Give them an opportunity to rectify it and make good and repay those past dues. Gee, a bank does that, right? So if you miss some mortgage payments, you can go and do a loan modification and work something out with the bank to start repaying that loan. Are you kidding me? How are they getting away with this?
And then we have this other story that came out of Denver in 2021. There were 50 homes that were foreclosed in this area of Denver, and they were all HOA foreclosures. So this community, it's called Green Valley Ranch; they had literally 50 homeowners that went into foreclosure over past-due fees, fines, assessments, what have you. So there's a story of this one family in this community in Denver that they were foreclosed upon, and they were being hit with fines, you know, $50, $100 fines. The grass is too high; they didn't put the garbage cans, you know, back into their garage after garbage is picked up, you know, little things like that, but it added up, and it added up to the tune of around $10,000. Now look, I agree that's a lot of money; should they have been keeping up with that? Yeah, probably, but their argument is they were struggling to pay those fines. Look, times are tough; times are tough right now, so they were struggling to pay those fines back to the HOA. Meanwhile, they were still making their mortgage payment, right? They were being responsible and still paying the bank every month, that mortgage payment. The other unfortunate thing is this family was not aware that their house could be foreclosed upon by the HOA. They had no clue about that. A lot of fines, $50, $100, so they went up to $8,000. Via couldn't pay the fines but says she had no idea that could lead to foreclosure, and then one day, somebody knocked on their door and said that they were the new owners of their home. How does that happen? That just blows my mind.
Oh my gosh, this is crazy. So yeah, they're just hanging out, this family's just doing their thing, and, um, yeah, new owner shows up and says, "Hey, I just bought your house." Yep, so this is just out of control. I can't get past the thought that these HOAs don't even give notice. They don't even tell these people that they're going to be foreclosed upon and they're going to lose their house. I don't understand that, how they can get away with that. And you can't just assume that homeowners are going to read that CCR that I mentioned before if there's a clause in there, you know, they didn't read it. Who reads that at closing, let's be honest, right? Those documents, the CCRs, they're about a few hundred pages long. Who has time to read through that?
The good thing is that some states have stepped up and are changing laws to limit these HOAs and their ability to foreclose on homeowners. I'm talking about States like North Carolina, Georgia, Colorado, and even Florida. Thank God these lawmakers are stepping up because so many people could potentially lose their homes. In North Carolina, this is just as recent as of February, just a couple of months ago. They're proposing changes to the laws to control the HOA's ability to foreclose on homes. Here's an example of a couple of things that they put into this proposal to change this. So one of the things I put in there is the amount of the lien has to be equal to or greater than 6 months of Assessments or $2,500, whichever is less. Another item that they put in this proposal: the association has to offer a reasonable opportunity for the homeowner to cure the default by making payments under an installment schedule. They also want to ensure that any increase in HOA dues does not catch homeowners by surprise, meaning that they got to give them ample notice to let them know that an increase is happening.
The same thing is happening in Georgia. A local news station down in Georgia actually did an investigation that sparked lawmakers in Georgia to refile this legislation that they're trying to get passed to do the same thing that they're trying to do in North Carolina, to put a limit on these HOAs from foreclosing on these properties.
Okay, so what can you do? What are your possible defenses if you find yourself facing an HOA foreclosure? Now, I'm not a lawyer, I'm a real estate agent, okay? Okay, I'm sharing some information with you that I found online, but talk to an attorney in your area to get more information about this. The things that you can use against a homeowners association to stop a foreclosure are things like erroneous accounting, erroneous accounting on the end of the HOA, seriously, that happens. So if the HOA did not properly record your payments, yeah, that's on them, and that is a good defense to actually get that foreclosure and the lien wiped out. Another defense is inaccurate recording, and I'm talking about recording of the lien. In some states, HOAs are required to follow a procedure to file a lien against your property. If they don't follow proper protocol according to your state laws, that could also get that foreclosure or the lien wiped out. Another possible defense is non-compliance by the HOA, meaning that they did not follow the laws that outline how an HOA can go about foreclosing on a property. If you find yourself in this situation, like right now, contact your local attorney, try to get this whole thing sorted out, and, uh, you know, get some proper legal advice. Don't just take my word from it. Again, I'm just a real estate agent, but talk to an attorney if you find yourself in this situation. I bet you never thought I'd be talking about this today, but yet here we are.
So who knew that this was an issue in this country, and, um, if you find yourself in a situation, please get with an attorney and get it straightened out as soon as possible. Thankfully, these states are putting laws into place to stop these HOAs from taking people's homes from them. I mean, this is just absolutely ridiculous.
Hey, if you are thinking about buying or selling your home and you need to speak with a real estate agent in your area, I have a link down below. You can fill out; I can get back to you within 24 hours. I have connections with lots of agents in this country, and I can help get you connected to an agent in your area. So again, click that link below, fill out the form, and I will reach out to you. If you want to learn more about foreclosure stuff, you can check out this playlist right here. Thank you so much for watching me today to get your dose of real estate reality. My name is Jackie Baker, and I will see you next time.
https://www.axela-tech.com/blog/local/new-jersey-hoa-collections/
Can a New Jersey HOA collect money from probate estate sales?
Yes. Once a property has gone through probate and the court has decided who is the legal owner, all the past due fees are due and payable to the HOA unless the governing documents have a provision that says the debt rolls over to the association. Going forward, after probate has been settled, the new owner must pay their fair share.
Can a New Jersey HOA collect after foreclosure?
Yes. New Jersey is a super lien state. An HOA’s assessment lien on a lot in New Jersey has priority, up to a specified amount, over the liens created by a lender’s earlier-filed first mortgage. This is referred to as a “super priority lien” and references the fact that in the event of a foreclosure sale, the super priority portion of the assessment lien must be paid to the HOA from the sale proceeds before satisfying the lien amount of an earlier-filed lender’s mortgage.
When faced with a foreclosure proceeding, a lender may offer to pay off the super priority lien amount on behalf of the delinquent lot owner in order to prevent the foreclosure and thereby protect its mortgage or deed of trust.
Finally, a bank foreclosure does not extinguish the debt that is owed to the association and the association has the right to pursue the old owner in court for a monetary judgment to recover this debt. It may not be a secured debt but it is surely collectible unless the governing documents say that the debt owed to the association rolls over to the membership.
Does an HOA in New Jersey have to attempt to collect before resorting to foreclosure?
Yes. Foreclosure should be the last desperate attempt to recover the association’s money. An HOA should consider a merit-based collection agency to recover its delinquent money before moving to put people out of their homes. Notices should be given to a delinquent before any action is taken.
How do other HOAs in New Jersey manage their collections?
The traditional way to collect is to have the management company send a few courtesy letters to a delinquent owner and then send the file to the attorney for foreclosure. New Jersey is a Judicial Foreclosure state and the process can be long and expensive.
What is the New Jersey statute of limitations on collecting HOA debt?
6 years. The statute of limitations periods for HOA claims are different for every state. In New Jersey, consumer debt such as HOA & Condo fees have a statute of limitations of 6 years.
Is there a limit on the fees (late fees, penalties) an HOA can charge for delinquent assessments in New Jersey?
Yes. Late fees can be charged per the governing documents. Regarding late interest, whether or not the governing documents are silent on the matter the association can charge the maximum allowed by law which is 16%.