A Homeowners Association serves a purpose – to manage the common areas of a community including parks, pools, and roads. Homeowners who live in the area are obligated to pay dues that usually cost between $100 and $10,000 annually. The cost depends on the location and the amenities included. In addition to the dues obligation, homeowners must abide by the association’s laws. They can dictate the kind of landscaping you can use, the color of your home, and even where you can park your car. These associations can impart fees for not following the rules and can even take your home away from you in a matter of weeks if you don’t pay the dues.
Photo by Bill and Mavis via Flickr
It seems utterly bizarre that this situation can even happen but it did and it does. A member of the US military came back from Iraq last year to find that his $300,000 home had been sold for $3,500 while his wife and kids were still living in it. The home was foreclosed upon not because he was past due on his mortgage payments (his house was paid in full) but because the family missed two payments of their Homeowner’s Association dues. This story, as told on NPR.org, is unbelievable but true. Not only did it happen to a member of the United States Army, it can happen to you.
There are 33 states where a Homeowner’s Association can file liens or foreclose on a property without going before a judge. The practice is referred to as a ‘nonjudicial foreclosure’ and the HOA can legally sell your home with no legal personnel involved. In Texas, were there are more than 30,000 HOA’s that have cropped up around the state. They have the ability to bring the foreclosure process to an end in just 27 days from start to finish.
Homeowners who miss a few hundred dollar payments can easily end up owing a debt of several thousands of dollars. Added to that cost is the legal fees the association incurs trying to get their money. If a homeowner cannot pay the amount they owed plus the HOA’s lawyer fees immediately, they can lose their home.
Those who do pay the dues and the fees are helping the HOA management companies and the attorneys involved make millions of dollars a year. Those who cannot come up with the money face foreclosure. In Texas alone, the percentage of foreclosure filings due to unpaid HOA monies has increased from 1% to 10% since the recession hit.
Unfortunately, the only true preventative measure you can take when you buy a home in a HOA community is to pay your dues on time, every time. If you cannot keep up with the dues associated with a community, you might want to consider relocation altogether.
If your present financial troubles are just temporary, you may want to consult with the HOA representative or look over any documentation you received in the beginning to see what can be done to keep you straight and prevent further action.
Legal advisors recommend any homeowner being foreclosed upon directly contact their Homeowner’s Association representative and plead for mercy. As most laws are on the side of the HOA, homeowners in default don’t stand much of a chance if the association is not willing to work with them.
If you feel you are endanger of a foreclosure for your HOA, find out what the law dictates in your home state. Texas laws seem to be heavily in favor of the HOA but in the other 32 states, laws do vary and can affect the outcome of your particular situation.
Currently, Texas law allows a HOA to have essentially more power to foreclose on a property than any city or county in the state. Many are expressing concern that associations now hold too much power, especially in light of the fact HOA’s can even foreclose on homes because of unpaid fines. Unfortunately, because of a loophole in the laws in Texas, homeowners face losing their home over very small amounts of money. New legislation is up for consideration to give the homeowners more protection in the state.
There have been reports that members of a HOA have been the purchasers of properties the association foreclosed on because of loopholes in the law. The military family in Texas is set to fight their case in court next year. If the individual involved was not a member of the US military, he would not even have legal options to get his home back but due to the Servicemembers Civil Relief Act passed in 2003, military members fighting oversees are protected from nonjudicial foreclosures. The outcome of that may change the way Homeowners Associations operate in the future.
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