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StumbleInvestors irked by steep HOA fees tied to foreclosure homes
The unkempt pool of a bank-owned property is shown Jan. 27 in the Ventana Canyon neighborhood of Henderson. Fines for stagnant pools and other violations are becoming controversial.
Fri, Feb 26, 2010 (3 a.m.)
With the foreclosure rate in Las Vegas leading the nation, investors have swooped in to take advantage of bargain home prices.
But their desire to make profits has, in some case, put them at odds with homeowners associations.
The battle appears to be intensifying after investment groups filed a class action lawsuit claiming they were overcharged by hundreds of homeowner associations and collection agencies for fines, interest and collection costs that accumulated while homes sat vacant during foreclosure proceedings.
Investors are crying foul over proposed limits on fees that associations could charge for past-due obligations. The proposed fees moving through the state Common-Interest Communities Commission, which oversees the associations, would be excessive and don’t do enough to rein in costs, investors argue.
“A lot of people have a problem with the amount that is being proposed, which is not reflective of what the actual cost is,” said attorney James Adams, who is representing investors in their state District Court lawsuit against homeowners associations and collection agencies. “The investors are concerned that the fees are excessive.”
The investors have circulated petitions and were prepared to attend a commission workshop this week before it was canceled because space wasn’t available.
As of Feb. 23, the meeting had not been rescheduled.
Collection industry representatives working with homeowner associations said they are doing nothing improper and the proposed fees are necessary to recover costs.
“The land speculators are not happy because they don’t want to pay anything,” said David Stone, president of collection company Nevada Association Services.
The investors are balking at proposed fees such as $325 for a notice of a delinquent assessment lien and other notices that run as much as $400.
Adams said all investors want to know is that the fees will be reasonable, and they worry that the regulations will cap an unreasonably high amount.
“They are charging $150 to $200 for a simple form demand letter that can be typed in 30 seconds and hit the print button,” Adams said.
The lawsuit filed in January alleges the associations and their collection agencies charge more in fines and fees than the law allows. The past-due amounts are capped at the equivalent of nine months of homeowner associations’ assessments.
What’s being proposed is basically the current industry standard that has no relation to the value of the service rendered, said Anita McFarland, managing partner of special assets at Cooper Castle Law Firm in Las Vegas, which does similar collections of behalf of lenders.
“The amounts that are being proposed are coming from the very persons who stand to profit the most from legitimizing their own fees,” McFarland said. “Those are fees that are three to four times higher than they should be. I would liken it to the fox watching the hen house.”
Trustees that foreclose typically charge about $650 plus costs, but several collection agencies charge three to four times that on behalf of a homeowner association to collect unpaid fees, she said.
“They might have someone they pay $15 an hour work for 30 minutes and end up charging $300,” McFarland said.
The Federal Home Loan Mortgage Corp., which has received federal bailout funds, has been overcharged by homeowner associations, she said.
“That means bailout dollars are going to these collection companies,” she said.
Stone didn’t give McFarland much credence because her firm sues collection agencies. He said the Nevada Legislature changed the law last year to expand the past-due fees from six to nine months because legislators had concerns about associations getting paid.
“I represent the homeowners associations who represent the people who follow the rules, who pay assessments, and they are calling me the bad guy,” Stone said. “They are land speculators, and they are taking their chances when they buy foreclosures. They are treating this as if it is some social wrong, but this is dollars and cents. They think if they can cast a big enough net, they can get something out of it.”
McFarland casts the blame on the collection companies. Association board members may think they are making the best choice by hiring aggressive collection firms because the association isn’t billed, she said.
“Many boards have been blissfully ignorant of what fees were being charged because it never impacts the budget of the association,” McFarland said.
Discussion: 13 comments so far…
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The Las Vegas Housing market is trenched with corruption. Even though the law "seems" appears to be followed, the collection companies are padding the fee to profit. Charging more then the service is worth is illegal.
a large group of us are very concerned about collection companies. Please send an email to chairman@allianceinvestor.com if you would like to support the following petition:
As a Nevada property owner, we have noticed a practice by collection agencies engaged by various homeowner associates that is repugnant. These collection agencies are referred accounts for relatively small past due HOA assessments-generally less than $1000 that are owed by the former property owners. The collection agencies are then charging fees that are several times the amount of the outstanding assessments to collect those assessments. The collection companies are also filing excessive liens against the property-essentially holding the property hostage-in order to coerce payment of their collection fees. Please sign this petition if you are interested in taking action to end the oppressive collection efforts such as bringing the matter to the attention of the Nevada legislature, the Office of the Attorney General and possibly the courts".
so far we have collected 141 signatures.
Is this irony or what? These foreclosure buyers, who are largely responsible for the problems we are having in the real estate market, are complaining about fees that they must pay. Boo hoo. I live in an HOA and these investors have purchased 3 homes in my community. They have yet to pay ANYTHING to the HOA as weeds grow, dues go unpaid, and my community looks worse and worse.
When you buy a house in an HOA, you are signing up to pay your assessments and follow the rules. As someone that follows the rules and pays every month, I want to make sure my neighbors are doing the same. I definitely don't want to have our assessments raised because other people aren't paying! For those that pay on time, collection company fees should be of no concern. The people getting upset about the fees are investors wanting to make a quick buck by buying foreclosures, or people who didn't follow the rules in the first place. If you buy a house, you're responsible for paying what's owed...that's that. Collection companies are for-profit businesses, so they have to make their money somehow. As long as they're within the law (which it sounds like they are), then they can charge whatever they'd like in my opinion.
"Iamconcerned" is right. This lawsuit is a lot of baloney, filed by greedy land speculators who are merely trying to line their own pockets at the expense of community associations.
The suggestion that collection agencies' fees are too high is ridiculous. The services for which these fees are charged include legal notices and legal demand letters, and if a licensed attorney were to generate the same documents, the fee would be twice as much.
Clearly the land speculators who seek to challenge the collection fees are unsympathetic to the plight of homeowner associations, and care only about the bottom line . . . their own profit. They care only about buying properties at the lowest price possible, not about an association's ability to collect dues and pay for ongoing community expenses.
In these trying times, homeowner associations are struggling to stay afloat and pay their bills, and depend upon the speedy and aggressive collection of delinquent association dues.
The companies that collect delinquent fees are professionals, and deserve to be paid well for their services. These services are not commodities that anyone can deliver, but are specialized collection services that deliver results.
Anyone who buys a house in a HOA should contact the HOA before closing to find out what fees are owed, then have the fee held out of the proceeds at the closing (escrow) to pay the HOA. In other words, the fees are deducted from the money the seller will get. They shouuld also get a letter from the HOA that they have until a certain date after colsing to correct the deficiencies (stagnant pools, landscape issues, broken windows, etc). If the buyer does not fix them by that date, then they would be assessed whatever fines are involved, since those would be after they took possession. Any buyer should demand clear title before taking ownership. Clear title includes the HOA charges being current. Any buyer who does not get the previous owner (bank) to clear the title is foolish.
I have owned a home in the same HOA for eight years and I am disgusted reading this article. I am active in my community and have seen my neighborhood and surrounding communities suffer. What are these investors complaining about, they making a profit by purchasing a bank foreclosure and selling it. It is the HOA's that lose out. During the long process of the banks foreclosing assessments are not being paid. My assessments have gone up to compensate for it and the appearance of my community has gone down.
The law is clear on what a person purchasing a property in foreclosure is required to pay and investors should be aware of what they are getting themselves into by buying a foreclosed home. Investor's don't care about my community; they are interested in turning the property and making the most money! No wonder they are griping about paying anything extra. HOA's have the responsibility to use a collection company, attorney, landscaper or any other professional in order to operate a community. Why should I as a homeowner paying my bills have to pick up the slack?
First of all, investors were the initial reason for the first housing failure/bust. Now they are trying to capitalize on individual's pain, despair and misery of losing their homes, which is scandalous and appalling by itself!
Now these same investors have the audacity to think they are being treated unfair. An investor is just that, you evaluate the investment and decide to take it or not. If you take it, you take all the risk (or in this case the monies and whatever fess associated to it) as is!
Maybe all these investors should be petition the BIG BANKS (which were just as much to blame for the original housing failure) they are dealing with to share whatever the expense is!
screw HOAs. investors should simply refuse to purchase properties that have a hoa.
Some of you are complaining about investors? You have got to be kiiding me, thank god somebody is buying these over priced houses, you should be kissing their feet, not complaining about them.
Mr. Stone's comment that the Nevada Legislature changed the law last year to expand the past-due fees from six to nine months because legislators had concerns about associations getting paid completely sidesteps the issue. The HOAs themselves are indeed only receiving 9 months of common expenses - but the collection agencies are receiving THOUSANDS of dollars from the banks and investors. The price gouging by the collection agencies does not benefit the HOAs at all.
Not that this is the biggest wrong in the world, or in Las Vegas today, but it's just another illustration of how our business culture has deteriorated. The law clearly states that Homeowner Associations are prioritized lien holders along with taxes and superior to mortgages and everyone else. Even if the home burn downs, the lien stays with the land and the value of the land will cover the HOA fees. This means that HOA's will always get their money, eventually. They are allowed by law to collect no more than 9 months of dues plus late charges and other fees. The law is clear. There is no need for attorneys. The HOA's management company can have their lien recorded and they will get paid eventually.
So when a homeowner stops paying their HOA dues, the HOA's management company files a lien right? Understand that it doesn't take a law degree to file a lien. It takes about an hour, costs $40 at the Recorders office, and multiple liens could be done on a monthly basis. Nope! The HOA instead hires attorneys, friends, like Alessi and Koeing.
And there are more money making opportunities for the Management company, by throwing in their own additional charges and incorporating those charges into the lien so that disputing them becomes next to impossible.
People losing their homes, not paying mortgage payments, typically do not pay HOA dues and don't respond to collection companies, attorneys, or anyone. The homes are eventually sold and the new buyers are responsible for up to 9 months of back dues. Surprise. The amount due is usually 3-4 times the amount that the HOA receives and sometimes higher. Multiply this by thousands of homes per month selling through foreclosure and I'd say that some attorneys are doing very well. Who says Lawyers aren't good businessmen?
HOA= people who spend others hard earned cash to do little to nothing to earn $,, watering grass around the building that was to be a club house, with the econemy the way its been it was hard to pay the fee,, thought husband paid it,, last yr we paid as we could and paid it all in full, now it went unpaid,,I sent him up to the park office to pay with my ck plus $40.. they refused it.. sent it to a collection agency who is trying to charge us double the bill plus more,, since they do little to nothing except fill their pockets and remove benifits we had when we bought with out notice,, I refuse to pay double plus for noncence,, we contacted our senator,, they are making it impossible to want to pay for many of our elderly to. I wanted to pay, but refuse to be ripped off!!! I was not informed that we were behind, I was not informed by my agent that my HOUSE was even in a mobile park when I made an offer to purchase via seeing the run down home on the internet,, now its a nice HOUSE!!!not a mobile home like every one else,A stick built house, , what do these fee's even cover, couldn't be the 70 yr old security guard who just yell's for the police if he gets scared,,it couldn't be for all the water they are wasting for grass no one wants< sarcaism, I am fed up, no one here wants a HOA , we protect each others property. we don't need you, Justice needs to be 1st