Homeowners Associations: The Robin Hood of Foreclosure
By Joey Pizzolato
Nevada is just one of a number of states that is experiencing losses in property sale values as a result of homeowner association foreclosures, according to a recent report by the Nevada Association of Realtors. Statutes in Nevada allow HOAs to foreclose on homeowners for not paying their association dues.
HOA liens are given the higher priority over first mortgage holders, so their debt is first, paid off and then the lender and homeowner are taken out of the equation. As a result, many people are able to get foreclosed homes at auction for a fraction of the price by paying back HOA dues compared to what homes were initially worth. Further, all remaining debt is erased, and borrowers can be stuck paying back mortgages for houses they no longer possess.
Homeowners association foreclosures are a controversial subject in Nevada. According to a report by the Nevada Department of Business and Industry, 77 percent of Nevada residents surveyed oppose HOAs ability to foreclose on homes because of unpaid dues. Eighty-two percent believe that debt to lenders should be paid before debt to HOAs.
However, if properly documented, all recorded lien-holders can get their fair share of repayment. According to Tiffany & Bosco, a law firm that practices in Nevada, the two biggest challenges in dealing with HOA foreclosures are, “ensuring that any super-portion of a HOA lien is properly calculated, and that a sale is properly noticed to all recorded lien-holders.”
According to the firm, the increased frequency of HOA lien sales began in 2012 when courts began recognizing HOA liens as having priority over other liens. This was bolstered by a 2014 Nevada Supreme Court decision that held HOA foreclosures could, in fact, eradicate the first Deed of Trust if conducted properly.
It is estimated that HOA foreclosures in Washoe and Clark country conducted between January 1, 2013 and June 30, 2016, resulted in a loss of over $1 billion. According to Tiffany & Bosco, laws that pertain to HOA foreclosures have been heard in the 9th Circuit Court and the Nevada Supreme Court, which have issued opposing rulings.
Joey Pizzolato is the Online Editor of DS News and MReport. He is a graduate of Spalding University, where he holds a holds an MFA in Writing as well as DePaul University, where he received a B.A. in English. His fiction and nonfiction have been published in a variety of print and online journals and magazines.