By B.C. Manion
Banks aren’t the only ones left holding the bag when homeowners foreclose on their houses. Homeowners associations feel the brunt, too.
“It’s an issue that every community in Pasco County has to deal with,” said Jim Flateau, president of the Pasco Alliance of Community Associations.
When homeowners foreclose on their properties and stop paying their homeowner association fees, everyone living in that community pays the price, Flateau said.
“When somebody doesn’t pay, that puts more heat on the others,” he said.
Abandoned properties also drive down values in neighborhoods.
When a prospective buyer drives into a neighborhood to look at home, and the house next door has 3-foot weeds, the potential sale is lost, Flateau said.
The general quality of the neighborhood is affected, too, when homeowner associations are unable to collect fees that are typically used for the upkeep of common areas, he added.
Issues such as those prompted the biggest turnout in recent months at the Pasco Alliance of Community Association’s meeting last week at the Land O’ Lakes Community.
More than 50 people representing homeowner associations, condominium associations and neighborhoods showed up to listen to a presentation by Steve Mezer, an attorney with Bush/Ross, who specializes in legal issues pertaining to homeowner and condominium associations.
Mezer is well aware of the problems the associations are facing.
“Some of you have foreclosures with weeds up to there. The houses, with squatters in them. The houses where people who are living in them are not paying you, and they’re not paying them. You’ve got all of these combinations.
“I’m not sure which is worse – you’ve got the squatter, the person living there for free, or the totally abandoned homes, with the weeds up to there. Which would you prefer to have? None of those are good scenarios for you,” Mezer said.
He alerted those at the meeting: “You may get marketed by all kinds of people. Attorneys. People who want to buy your liens, attorneys who want to buy your liens. Companies that want to buy your liens and buy your bad debt.
“The arrangements that these people want to make, first of all, I’m not sure that they’re legal, but secondly, anything that they can do with that bad debt claim, you can do, too.
If there’s a property that is delinquent in homeowner association fees, a lien can be attached to the property and the association can foreclose on the property, Mezer said.
One popular strategy is for the homeowners’ association to place a lien on the property, foreclose on it and rent it until it loses the title when the mortgage foreclosure case is completed, Mezer said.
Typically, if a mortgage foreclosure case has been dismissed, it will take at least a year before a new case would be heard – making it safe for the homeowners association to rent out the home for a year.
On average, foreclosure cases are taking two years or more, he said.
The up side is that the homeowners association can make sure its fees are paid out of the rental income and can make sure the property meets its deed restrictions, he said.
On the down side, many homes that are in foreclosure have been stripped – making it a costly proposition to get them ready to rent.
“Candidly, most of my boards don’t want to get into the rental business. If the market were better, we would have been talking about sales. But that’s really not a reality for most of you,” Mezer said
When a house has been abandoned, it is not a good idea for a member of a homeowner association to go in to inspect its general condition, Mezer said.
“I would probably not go in, if I could avoid going in there because the claims they’re going to make against you for not securing the property. Something is missing or damaged. When the copper turns up missing, ‘I saw the guy out there. He was in there the other day with his truck and the copper ends up missing,’” Mezer added.
In some cases, it may be best to approach the homeowner who is in foreclosure, but has not moved out to see if they want to stay in the house and rent it.
“I prefer you talk over the phone and don’t go knocking on the door, if somebody owes you money. You never know what’s on the other side of that door,” Mezer said.
A representative of the homeowners’ association can tell the owner: “We’re going to go ahead and take title of your home. If you want to stay there and rent it back from us, you can do that. You can stay there, but you have to pay us. If you don’t pay us, we will evict you,” Mezer said.