HOA’S HOME FORECLOSURES –RUTHLESS ABUSE OF POWER
THE MECKLENBERG TIMES ARTICLE- HOA Foreclosures—
By Diane Petryk
CHARLOTTE –Diana Hentz, of Cary, had to declare Chapter 13 bankruptcy to save her home from a Waterford Place Townhomes association’s foreclosure attempt. They filed a lien when she owed about $400.
Rick Mauney’s $370,000 home in Chestnut, near Matthews, was nearly foreclosed on by his homeowners association for $1,374 in back dues.
Jim Becker, Huntersville, refused to pay a $100 fine imposed by Wynfield Forest homeowners association because he put rocks in his flower bed instead of wood chips. As a consequence, he’s paying off $9,000 in fines and attorney fees to save his home from foreclosure.
An act that would bar homeowner associations from foreclosing for dues and fees owed may be languishing in state house committees, but the debate that surrounds it is lively.
It’s House Bill 175, introduced in February by Rep. Susi Hamilton (D-New Hanover) and co-sponsored by Democratic Representatives from Mecklenburg County, Rodney Moore and Kelly Alexander. The bill was last seen in the House Judiciary Committee and, could be passed on to Regulatory Reform and Finance, according to Hamilton’s office. Sources at the state house say it cannot be acted upon this year because it did not make the crossover deadline for being taken up by the Senate and with a short session next year, it will not have any chance of consideration until 2015.
That’s too bad, according to activists who hope to rein in homeowner’s associations run amuck, as they see it. Others, HOAs and their management firms, are breathing sighs of relief.
To Pat Patterson, owner of Carolina Association Management, Inc., “it’s business,” and he’s comfortable with “if you don’t pay, you don’t stay.” That’s because the tab for the non-paying member must be picked up by the members who do pay.
If it’s a condo or town home, we have to pay the water bill, Patterson said. The city won’t bill individually. “If you don’t pay, how am I going to pay the water bill?” That goes for the upkeep of roads, gates, landscaping and assorted amenities like pools and tennis courts.
Homeowner’s rights activist Jim Lane, of Mooresville, thinks those types debts belong in small claims court. Patterson says a judgment there wouldn’t mean a thing. “If you can’t pay the dues, you won’t be able to pay a court judgment.”
And typically, you can be late on your mortgage longer than 90 days and still avoid foreclosure, Lane said.
In his opinion, HOA boards, made up of volunteers without training prerequisites, jump to foreclosure as soon as they can because they are steered that way by their management firms and attorneys, who make money off the matter. That’s Lane’s personal experience after being president of an HOA and fighting one, and, he said, it’s also that of homeowners he has counseled since founding a homeowner’s coalition.
It’s not all so quick in the experience of Chesney Wray, legal accounts coordinator for Henderson Properties of Charlotte, which includes HOA management among its services.
“A number of efforts are made,” to resolve prevent a foreclosure action, Wray said. “We do send out late letters, pre-lien letters and foreclosure notices to the physical address and billing address, if different.”
“We bend over backwards to make sure we’re working with the home owner to structure payment plans,” says Derek Greene, whose business, Community Association Management in Charlotte, manages 200 associations involving 40,000 housing units..
Still, notices sometime miss the mark.
For one thing, Patterson said, people don’t open them.
Charlotte realtor Nadine Deason said she heard of a property about to be sold on the courthouse steps and it was one of her listings. She called the owner and the owner had no idea it what was about to happen.
That was nearly the case with Mauney. He and his wife had to return to Raleigh. It was only because they rented their 1107 Butterburr Dr. home near Matthews, he said, that he was alerted to the foreclosure action, “when the tenant called and said there was a foreclosure notice tacked to the door.” He said he had only a couple of days to pay $1,374 and an additional $1,100 in attorney fees and costs.
Mauney’s subdivision, Chestnut Oaks-Stallings, had been managed by Henderson, which was not a party to the foreclosure attempt, but was turned over to Braesael Management in Matthews. Braesael never sent a bill, Mauney said, and it wasn’t because they didn’t have his forwarding address. He has a letter from them about grass height dated two years earlier. Braesael would not comment for this story. Its attorney, Tim Sellers, wouldn’t either, stating the case is still active.
Mauney admits he should have inquired about the dues, but since the bills came only once a year, and he was juggling his wife’s medical bills and kids’ college fees, he let it slide.
“It’s scary,” he said. “I didn’t realize that (foreclosure) could be done.”
Neither does the average home owner, according to Deason.
“I tell my home owners, if there’s any bill you can’t pay, pay your home owner’s association fees – because it’s a living nightmare if you don’t.”
Hobbling the dictatorial power of HOAs wouldn’t be amiss, Deason said. Her client who almost missed the foreclosure of her own home was financially strapped after a divorce. “(She was) left emotionally devastated. It’s these people who fall prey to these types of things.”
“Where are the legislators who protect the meek and the feeble?” she asks. “Isn’t that what they’re supposed to do.”
Indeed, they’re not listening to their own committee reports. On May 1, 2012, after a year of study and public hearings, the House Select Committee on Homeowners Associations concluded that:
“…the that the current laws governing community associations in Chapters 47C and 47F of the General Statutes do not offer sufficient protection for the rights of owners of property in planned communities and condominiums, and that statutory revisions are necessary in order to achieve a better balance of the interests of property owners in these communities and the associations that govern them.”
Becker puts it more bluntly: “HOA laws are unconstitutional.”
He said HOAs may be based on contractual law, but a state law that allows no recourse for homeowners are unconstitutional because laws are supposed to be fair for all. “There’s nothing there to protect the homeowner,” he said, and HOAs, their management firms, and attorneys have the deck stacked all their way. –a homeowner can’t even get into court to argue that HOA actions were arbitrary, discriminatory or just downright absurd.
Becker’s Wynfield HOA is managed by Hawthorne Management of Charlotte. Sam Hicks,who said he represents Hawthorne, said the company has no comment.
“You contract to keep the neighborhood up to a certain standard,” Becker said. “Not to be viciously sued by people with personal vendettas, who don’t apply their rules equally to others.”
Patterson, at Carolina Association Management, admits the attorney fees in these matters “do get excessive at times.” He said he strives to help people keep their homes while those who make money off the foreclosures want them to happen. Some attorneys have been known to buy the homes they foreclosure on and sell them for a profit, which, he said, is morally reprehensible.
“It’s collusion,” Becker said.
Unlike the mortgage company, the homeowner’s association has no investment in the home, Lane said, yet it can threaten someone’s ownership — sometimes for as little as $50.
That’s necessary, Patterson says, but the HOA doesn’t want the home. It wants you to stay. It just wants to be able to pay its bills for the good of the whole community. He said he told Rep. Moore that his bill “thumbs its nose at my business.” That it would give people the right to not pay anything.
Greene said an associations’ only source of income is dues and assessments and they need the clout of threatened foreclosure to facilitate collecting.
Lane disagrees. “That’s as if Duke Energy went to the legislature and said, if you don’t give us the power to foreclose, we’ll never be able to collect on our utility bills. It’s ridiculous.”
“No other agency in the state can foreclose on you in 90 days.”
But homeowner’s associations aren’t the only entities, besides mortgage lenders, that can foreclosue. Taxing authorities do it all the time. Those are the big three, said Charlotte attorney Chris Gelwicks. It’s possible for anyone who can place a lien, like a contractors or mechanics lien, to force a sale after judgment, he, said, but that doesn’t happen very often.
o Lane, the proper place for homeowner association collections is small claims court. That, indeed, is what House Bill 175 proposes. It would take away the right of Homeowner’s Associations to foreclose, but liens would still be permitted.
Real estate attorney Mike Hunter, of Horack Talley Pharr & Lowndes, P.A, in Charlotte, acknowledged that indebtedness to an HOA can increase fast when attorneys and courts get involved.
Dues the homeowner knew about a head of time are one thing. But Hunter says HOA boards have wide discretion in applying fines as penalties for things a homeowner did or did not do.
Lane knows that only too well. Planting some pansies in an untended flower-bed of a common area in his Gilead Ridge subdivision in Huntersville resulted in a $100 fine from his HOA. After fines and late fees and attorney fees, the infraction cost him many thousands of dollars.
Without legal restraint of any kind, these fines can lead to abuse of power, he said, and if power corrupts is an axiom, its reasonable to believe that some members of the 17,000 HOA board’s in North Carolina all too often act as bullies.
Hentz, a self-supporting single mom, said she’s paid up on HOA dues, but feels that additional fees are being fabricated by York Management in retaliation for her winning her case against foreclosure. York attempted to have a court lift the protections of her bankruptcy, under which she makes payments, but that was ruled improper and the judge denied any and all costs associated with the filing.
“York is tacking on more fees without explanation. They won’t explain why, just that they can,” she said. This means her 17-year-old son continues to be denied use of the community pool, even when friends invite him to come with them. It’s a source of public humiliation and harassment, she said.
York manager Virginia Davis would not comment.
“The issue is that I have paid my dues in good faith and based on the filed Covenants, I also made a reasonable effort to pay all of the additional fee’s that were demanded,” Hentz said. “Not only were those payments not enough, but additional fees were added and backdated to keep me in arrears.
“Based on the “ledgers” the HOA and York properties were not honest about what they were doing, and have still not explained why this excessive and unnecessary action was taken when I have not been behind on my dues for a year. I have been behind on my dues because of job loss, I never abandoned my responsibilities.”
Deason said she knows this happens frequently. “You hear complaints that HOA members are getting nasty notes. And board members act like ‘power hungry little Nazis.’ They think they own the community and make life miserable for everyone else.”
It’s not a new problem, she said, but with the recession, what we’re seeing may be more of all kinds of fines. Homes that come with HOA may be harder to sell in some cases, while some buyers are still demanding them.
There are two sides here, she said. “If some people stopped paying their homeowner’s dues, landscaping would be atrocious, pools would be green, and every property value would take a nose dive.”
She said she saw that happen to the entire community once, when there was a dues boycott in opposition to some things the developer was doing.
But quality of life can be destroyed in a community living under threat of financial penalty retaliations for petty things.
People who don’t want rogue neighbors pulling down their neighborhood seek HOAs, Deason said. Those opposed to anybody telling them what they can and can’t do avoid them. Lane feels they work in communities where the houses are $650,000 and up. “If they’re under $300,000, it’s a disaster,” he said.
If HOAs impose irrational fines and then try foreclosures to collect it will backfire, Becker said, and no one will be able to sell their home in the subdivision and it will become more difficult in HOA areas overall.
He already has this sign ready for when he sells: “You’re welcome to buy this house, but beware, it’s an HOA area!”
Although HB 175 went nowhere, the legislature did, this session, pass two bills affecting HOAs.
HB 278, effective July 1, provides for voluntary mediation of disputes between owners and their HOA. Critics say this changes nothing.
HB 331 requires a trustee be appointed by the HOA to conduct the foreclosures after October 1. This bill also includes rules and procedure for collecting association assessments and when giving notices of liens and foreclosures.
“The trustee is supposed to be a neutral party to the foreclosure process,” said Cynthia Jones, an attorney with Horack Talley. “The new law provides that the HOA attorney may act as trustee as long as the foreclosure is not contested. Once it becomes contested, a different trustee must be appointed and they will conduct the foreclosure and sale.
“The HOA attorney and homeowner will still be involved to argue over the validity of the debt and foreclosure, but the trustee will now be a neutral third party. Currently, since there is no trustee, the only two parties are the HOA attorney and the debtor.”
Meanwhile, defenses to HOA foreclosures do exist under the right circumstances. For instance, if an assessment unauthorized by the community’s covenants document is made and causing the lien, the lien and foreclosure would likely be invalid. For others, search “defenses for HOA foreclosure” online.
Diane Petryk – Freelance Reporter
From: Diane Petryk-Bloom
Subject: HOA Foreclosures article
Date: July 13, 2013 4:55:09 PM EDT