By Deborah Goonan, Independent American Communities
Image Source: https://goo.gl/images/sThqof
Mainstream media is finally starting to publicize a few of these outrageously unjust foreclosures by homeowners associations.
WTSP News 10 reports that the family home of Tina and Luis Lopez was simply sold out from under them for a mere $19,000. The couple originally paid $270,000 for their home. The HOA has claimed they missed a single $150 assessment payment in 2009, and their debt later ballooned to $4300 as April 2016. Most of that debt was assessed to cover legal costs and attorney fees.
According to Tina Lopez, the HOA never provided the homeowners with proper notice of the foreclosure sale. The owners had believed that their debt was settled following a class action lawsuit against the attorney firm for violations of the Fair Debt Collection Practices Act. (FDCPA)
Here’s an excerpt from the report.
Homeowners: From $150 HOA fee to foreclosure (VIDEO)
Kendra Conlon , WTSP
The Lopez family has called their Rivercrest neighborhood home since 2005, when they bought if for around $270,000.
The HOA put a foreclosure lien on the house and recently sold it at auction for $19,000. The family’s cut: $14,000.
“You have a company that comes in and says let’s just take your house away. It’s not right. There’s no compassion. It’s not morally right,” says Tina Lopez.
Tina and Luis Lopez say they’ve been paying their annual dues, but say they didn’t get a notice that the HOA was missing the 2009 payment for four years. In that time, $150 turned into $750 then $3,000 in fees. They agreed to a payment plan with HOA lawyers Bush Ross.
“They’re heartless, no compassion, they’re greedy,” says Tina Lopez.
Records show Bush Ross landed in a class-action suit accused of violating the Fair Debt Collection Practices Act. The Lopez family got $300 from the settlement and thought they no longer owed the past dues, so they stopped paying. They now know, that was a mistake. The home went back into foreclosure. But the Lopez family says they got no notice that it was headed for the auction block.Read more, and see video here:
I wanted to find out a little bit more about the common interest development where the Lopez family has lived since 2005.
It turns out Rivercrest is a Community Development District (CDD) that works in tandem with Rivercrest Community HOA.
Here’s how it works, according to Rivercrest CDD’s website:
Overview of Community Development Districts
Community Development Districts (CDDs)
A CDD is a governmental unit created to serve the long-term specific needs of its community. Created pursuant to chapter 190 of the Florida Statutes, a CDD’s main powers are to plan, finance, construct, operate and maintain community-wide infrastructure and services specifically for the benefit of its residents.
What will the CDD Do?
Through a CDD, the community can offer its residents a broad range of community-related services and infrastructure to help ensure the highest quality of life possible.
CDD responsibilities within our community may include storm water management, potable and irrigation water supply, sewer and wastewater management, and street lights.How CDDs Operate
A CDD is governed by its Board of Supervisors which is elected initially by the landowners, then begins transitioning to residents of the CDD after six years of operation. Like all municipal, county, state, and national elections, the Office of the Supervisor of Elections oversees the vote, and CDD Supervisors are subject to state ethics and financial disclosure laws.
The CDD’s business is conducted in the “Sunshine,” which means all meetings and records are open to the public. Public hearings are held on CDD assessments. and the CDD’s budget is subject to annual independent audit.
Relationship with Homeowners Associations
The CDD complements the responsibilities of community homeowners associations (HOAs). Many of the maintenance functions handled by these associations in other communities may be handled by the CDD. However, the associations have other responsibilities such as operating amenities and ensuring that deed restrictions and other quality standards are enforced. The CDD may contract with the master homeowner’s association to perform maintenance functions.
You can read more details about Rivercrest CDD here:
Notice that the CDD is responsible for all of the essential services for maintaining common infrastructure at Rivercrest.
So what does the HOA do? See for yourself.
Rivercrest Homeowners Association
The Rivercrest Master Homeowners Association, Inc. (HOA) is responsible for consistency of residential property aesthetics, as governed by the adopted by-laws. The services provided are:
Administrative
Financial
Architectural Reviews
Enforcement Activities
Legal
Insurance Provision
Landscape maintenanceWise Property Management
17824 North US Highway 41
Lutz, FL 33549-4502
Gary Saliba, Licensed CAM, CMCA
813-968-5665, Ext. 308
813-968-5335, Fax
GaryS@WisePropertyManagement.comSource:
The HOA serves as the “aesthetics police,” making sure Rivercrest residents keep their homes and yards looking neat, tidy, and somewhat uniform in appearance. The HOA serves as the “Mother May I” committee that decides what color you can paint your house, whether or not you can install a fence or a pool, and whether or not you can tear out a water-thirsty lawn and replace it with a water-wise landscape.
In other words, the HOA provides all the non-essential services that restrict homeowner property rights.
Why is this important?
When you own a home in a CDD (or other similar Special District that constructs and manages infrastructure in a common interest development), you will almost always be subject to at least two layers of government – the CDD and the HOA. You will have to pay assessments to both!
But you will pay the CDD and the HOA separately.
How CDDs collect assessments
Because CDDs are Special Districts – public units of limited purpose government – CDD assessments are included on the property tax bill, so they are usually paid through an escrow account when homeowners pay their mortgage. If there is no mortgage, a homeowner would automatically pay their CDD assessments when paying their property taxes.
At Riverscrest, essential services are funded when the property tax collector forwads those CDD assessments to the management company for the District.
How HOAs collect assessments
As with most HOAs, the homeowner will be billed directly by the Association on an annual, quarterly, or monthly basis. When you own property in a CDD, your HOA assessments tend to be a bit lower, since the bulk of infrastructure maintenance is paid for through your CDD assessments.
If you miss a payment with your HOA, the Board and/or management company has a tendency to send the account to collections within 60 days. Sometimes the management company is even affiliated with the collection company or law firm. You would think that would be illegal, due to an obvious conflict of interest, but in most states, this is perfectly legal.
In this case, Wise Property Management simply “reports delinquent accounts for collections” to Bush Ross Attorneys of Tampa.
What is the justification for HOA Foreclosure?
Look no further than Community Associations Institute’s (CAI) Public Policy:
CAI on EFFECTIVE COLLECTION OF COMMUNITY ASSOCIATION ASSESSMENTS
Excerpt: (emphasis added)
Community Associations Institute (CAI) encourages the creation and continuation of effective methods to ensure efficient, economic and successful association collection procedures. CAI opposes the enactment of overreaching governmental limitations on effective collection of assessments, fees and other charges of community associations. CAI supports laws that strengthen such collection methods, provided collection methods are undertaken in a fair and reasonable manner, giving the affected owners notice, the opportunity to be heard and other due process protections.
The financial viability of any community association ultimately depends on its ability to collect assessments to meet continuing expenses. Governing documents include language that each owner, by acceptance of deed or other conveyance of property, is deemed to covenant and agree to pay to the association the annual assessments. This obligation to pay assessments is vital to the community association’s viability and integrity, and boards of directors (“boards”) have a fiduciary obligation to ensure the timely collection of assessments. Boards use these assessments to maintain common areas, buildings and amenities, to support the overall administration of the association and to provide community services to owners. The overall health and welfare of the association is wholly dependant on timely collection of owners’ assessments.
Where delinquencies are high in a community, the association suffers. Other owners are forced to pick up the financial shortfall and bear the burden, both in time and resources, in attempting to collect from delinquent owners. Additionally, high delinquencies in a community may conflict with federal lending criteria, thereby jeopardizing an owner’s ability to secure financing with lenders or to attract new buyers. Further, communities that experience high delinquencies are typically unable to maintain healthy reserves for capital improvements and the physical appearance, soundness and integrity of the common elements. Community associations must be able to collect promptly and efficiently from delinquent owners in order to meet their budgetary obligations each month. The goal is to avoid expensive litigation and other collection expenses over a long period of time, and to minimize the burden of increased common expenses on remaining owners.
Read entire policy statement here:
So, to summarize, HOA industry trade group CAI argues that collection of delinquent assessments by any and all means, is justified because HOAs must provide essential services to maintain the common elements. If owners fail to pay HOA assessments, there will not be enough money to provide maintenance services or save for future capital improvements.
But…
In Rivercrest, the CDD provides all maintenance and capital improvement services to common elements. And Tina and Luis Lopez were not delinquent on their CDD payments. They were only $150 delinquent on their HOA payment.
Rivercrest HOA provides only non-essential services – enforcing deed restrictions – that affect individually owned properties.
Even if every owner stopped paying HOA assessments, what’s the worst thing that could happen?
Well, the HOA aesthetics police would be put out of business. So what?
Now…there will be fear mongers that claim that without the HOA, Rivercrest will become a neighborhood of full of purple houses with pink flamingoes and cars up on blocks in the front yard with grass at least waist-high.
But those of us who grew up in homes without HOAs, and who have owned homes without the “benefit” of a group of neighbors enforcing CC&Rs, know that most people take care of their properties when they feel good about their neighbors. There is no absolute need for someone to enforce arbitrary standards to keep your property looking perpetually “show ready” to a potential buyer, or to strictly limit lifestyle choices, so long as you don’t actually harm your neighbors.
Just for the sake of argument…
Even if the HOA were providing essential services, it’s hard to rationalize foreclosing on a home for $150. Remember, the $4,300 lien on their home was created by attorneys handling the collection account. Nearly all of that money, if paid by the Lopez household, goes straight to Bush Ross Law Firm. The only benefit to Rivercrest HOA is that they get their $150 plus interest.
In a community the size of Rivercrest, that’s a fraction of one percent of the HOA’s budget.
But notice that CAI – the trade group that claims to represent the interests of millions of residents of “community associations” – is vehemently opposed to government-imposed limitations on collections.
I guess that’s why so many of CAI’s members are HOA attorneys.
This is the typical argument fed to homeowner association board members by industry attorneys (mostly CAI members). The truth is that the HOA board may opt for foreclosure of a lien, but they are not obligated to do so. And, in fact, in cases where there is little equity in the property, historically, HOA attorneys have recommended NOT proceeding to foreclosure. The truth is that the issue here is not the amount of past due HOA assessments, but the amount of attorney fees and collection costs heaped onto what was originally a small amount of money. In the end, the HOA attorney made thousands of dollars on this foreclosure, far more than the association actually recovered. In the end, the investor purchased a $270K house for $19K. What does that do to real estate comps for Rivercrest? It certainly doesn’t increase property values? So what is the net benefit for homeowner members of the HOA, if any? Members have received less than $1 each toward recovery of the unpaid assessments, but lost tens of thousands of dollars in equity due to firesale HOA foreclsoure sale prices and bad publicity for the community.
Proper vetting of facts would significantly change the outlook of your editorial. Have you asked the Lopez’s if they had failed to pay their responsibilities and went to the HOA Board asking for a deferred payment plan. Then after receiving a rather “soft” deferred payment plan tendered a non-honored check and then nothing. Having already made provisions to alleviate the requirement for a large one-time payment, the HOA Board was left with no options and foreclosed. This action eliminates some of the residents having to make payments for those who find it inconvenient!