[WSBARP] What is the best possible outcome in this situation? (HOA debt)

[Inge Fordham]

Something to be aware of if the clients opt for BK – there is often some lag time between the BK discharge and the bank foreclosing on the property and taking ownership.  The HOA can go after the clients for all dues assessed against the unit following the BK discharge for as long as they remain legal owners of the unit.  If the bank will accept a deed in lieu, the clients may be able to control the timeline (as opposed to just waiting for the bank to take ownership).  Many owners do not realize this and end up with a judgment against them (albeit for less than it would have been but for the BK) despite having filed for BK.


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Inge A. Fordham | Attorney
Fordham Law, PLLC
3218 Sixth Avenue | Tacoma, WA 98406
Office: (253) 348-2657 | Mobile: (206) 778-3131

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From: <wsbarp-bounces at lists.wsbarppt.com> on behalf of Ron Housh <ron at housh.org>
Reply-To: WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com>
Date: Thursday, November 21, 2019 at 4:24 PM
To: WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com>
Subject: Re: [WSBARP] What is the best possible outcome in this situation? (HOA debt)

Bankruptcy?
Sent from my iPhone

On Nov 21, 2019, at 3:44 PM, Craig Blackmon <craig at lawofficeofcraigblackmon.com<mailto:craig at lawofficeofcraigblackmon.com>> wrote:
Listmates, I have a very unfortunate case concerning a debt <$10k. In other words, it doesn't merit big legal fees (and the client doesn't have the money in the first place). So I am turning to this awesome community for some good insight on a possible path forward. Oh, and set me straight on my analysis, as needed. Thanks in advance.

Facts: Home is part of an HOA. In 2006, owner/client defaults on mortgage and HOA dues. 2009 lienholder initiates foreclosure; tenants vacate; lender changes locks to secure property. Lienholder then discontinues sale. Owners do not receive or understand the Discontinuance, and they believe they no longer own the home (as evidenced by the changed locks). They move on with their lives. Lienholder turns off utilities and eventually begins payment of property taxes.

Today, nine years later, HOA files suit. Surprise! Client still owns the place (and is thus liable for HOA dues). Home has an FMV of $285k. However, $30k is needed to get home in market/rental condition. Lienholder asserts $410k owed on lien, claiming all principal and interest due since default. In reality, though, per Cedar West Owners Assoc<https://links.casemakerlegal.com/docid/2325009?bookname=public_url>., the lienholder is owed $275k (the last six years of missed payments plus remaining principal).

HOA has no interest in taking ownership of unit and wants to be paid in full for dues owed to date (and those in the future, of course). Client obviously wants to resolve HOA debt forever -- past due and future amounts -- and finally be done with the millstone hanging from their necks.

Anyone see a happy ending here for my clients? Or really any ending, other than ongoing catastrophe? If you do, I am all ears. Thanks for taking the time to read this post!

Craig


Craig Blackmon, Attorney at Law
Seattle Real Estate Lawyer<http://www.seattlepropertylawyer.com/>
92 Lenora St. (The Makers Space, a shared work environment)
Seattle WA 98121
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