Hoa Oct 2011 Foreclosure Bankruptcy

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A presentation to Idaho HOA board members about the consequences of foreclosure and bankruptcy on assessment claims.

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Hoa Oct 2011 Foreclosure Bankruptcy

  1. 1. Covenants and Their Effects on Foreclosure And Bankruptcy -Jeremy O. Evans joe@vf-law.com
  2. 2. 1. Covenants2. Foreclosure3. Bankruptcy
  3. 3. Covenantso Nationally, CAI (Community Associations Institute) estimates that the number of communities governed by declarations grew to 309,600 in 2010, from 222,500 in 2000, with 62 million residents. wwan e r w .c io l .og in
  4. 4. o Declaration of Covenants, Conditions & Restrictions – C nrc te r o c vn ns o t th oy f o e a t. a • T e op rt d c m ns f h m o n r as c t nae h c roae o u e t o a o e w es so iaio r e u a n t c nrcs m n te e b r o te so iaio . q ivl to o t t a o g h m m es fh as c t n e a T inL k s ilg Po et A s , I . v C o l , 1 4Ia o1 2 w a e V l e rp r s’n n . rw y 2 d h 3 , a y c e 1 5 5 P d6 1 6 4( 9 3 3 8 7 .2 1 , 1 1 9 ) . – B l s o ee to y w c vrd o . a • B l s f n n rf c roaio ae in in a a o t c a o g y w o a o poit op rt n r b d g s c nr t m n a a m m es F s F d rl a. A dL a A s o T inF l v E s e b r. irt e eaS v n o n s’n f w as . at l E dM tEe . C ., Ld 1 2Ia o7 2 7 4( 9 7. n u. l c o t., 1 d h 6 , 6 1 8 )
  5. 5. 45-810. Homeowners association liens.(1) Whenever a homeowners association levies anassessment against a lot for the reasonable costsincurred in the maintenance of common areasconsisting of real property owned and maintainedby the association, the association, uponcomplying with subsection (2) of this section, shallhave a lien upon the individual lot for such unpaidassessments accrued in the previous twelve (12)months.
  6. 6. Not just a contracto Agreement (Offer and Acceptance).o Consideration.o Contractual Capacity.o Defense: – Lg l . ea y it – G n in n s o asn. e u e es f se t – Fr . om
  7. 7. Equitable Servitude An equitable servitude is a term used in real property law to refer to a non-possesory interest in land, allowing the holder to make use of a property or refrain from doing something on a property. It is a promise concerning the use of land that (1) benefits and burdens the original parties to the promise and their successors and (2) is enforceable by injunction.(Think of an easement).
  8. 8. AssessmentsA/k/a association “dues” or “fees”
  9. 9. Its a sellers real estate market in Boise Real Estate Market Report BY GILBERT MOHTES-CHAN, TUESDAY, OCTOBER 11, 2011.Inman News™o During the second quarter, 34.8 percent of homes with mortgages (45,278) in the Boise region were underwater…o Overall, Idaho ranked ninth nationally with 23 percent of mortgages upside down.o In 2010, lenders repossessed 11,289 homes (1 in every 21 units) in the Boise City-Nampa area…o Last year, Boise ranked 20th among top U.S. metro areas in foreclosure rates, while the state ranked eighth nationally.
  10. 10. Foreclosure
  11. 11. Foreclosureo Foreclosure is an action brought by a lending institution or some other party who has received property interest is part of the financial arrangements to purchase real property.
  12. 12. Foreclosure45-1505. Foreclosure of trust deed, when.The trustee may foreclose a trust deed by advertisement and sale under this act if:(1) The trust deed, any assignments of the trust deed by the trustee or the beneficiary and any appointment of a successor trustee are recorded in mortgage records in the counties in which the property described in the deed is situated; and
  13. 13. Foreclosureo Deed of Trusto [Any Assignments]o Notice of Defaulto Trustee’s Deed
  14. 14. Terminating the Rights of Other Creditorso When property is properly foreclosed, all junior lienholders’ claims on the property are extinguished. *Including an HOA’s
  15. 15. Foreclosureo Foreclosure does NOT eliminate all rights to payment for associations…o it eliminates claims against the property.o Foreclosure does NOT eliminate the homeowner’s duty to comply with the declarations.
  16. 16. Bankruptcyo Automatic Stay.o Discharge.
  17. 17. Effective: April 1, 2007 United States Code Annotated CurrentnessTitle 11. Bankruptcy (Refs & Annos) Chapter 5. Creditors, the Debtor, and the Estate (Refs & Annos) Subchapter II. Debtors Duties and Benefits § 523. Exceptions to dischargeo (a) A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt--o…
  18. 18. § 523. Exceptions to discharge(a) A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not dischargean individual debtor from any debt--…(16) for a fee or assessment that becomes due and payable afterthe order for relief to a membership association with respectto the debtors interest in a unit that has condominiumownership, in a share of a cooperative corporation, or a lot in ahomeowners association, for as long as the debtor or the trusteehas a legal, equitable, or possessory ownership interest in such unit,such corporation, or such lot, but nothing in this paragraph shallexcept from discharge the debt of a debtor for a membershipassociation fee or assessment for a period arising before entry of theorder for relief in a pending or subsequent bankruptcy case;
  19. 19. United States Bankruptcy Court, D. Arizona.In re Monica Emilie JOHNSON, Debtor. No. 2:08-bk-13937-SSC.   May 1, 2009.
  20. 20. In re Monica Emilie JOHNSON, Debtor.o The Court advised the parties at the hearing that if a creditor has a valid, pre-petition lien, that lien “carries through” the bankruptcy proceedings. Dewsnup v. Timm, 502 U.S. 410, 112 S.Ct. 773 (1992).
  21. 21. In re Monica Emilie JOHNSON, Debtor.o The Court advised the parties at the hearing that if a creditor has a valid, pre-petition lien, that lien “carries through” the bankruptcy proceedings. Dewsnup v. Timm, 502 U.S. 410, 112 S.Ct. 773 (1992).o That pre-petition liability also would have been extinguished as a personal liability of the debtor. 11 U.S.C. § 523(a)(16).
  22. 22. In re Monica Emilie JOHNSON, Debtor.o The Court advised the parties at the hearing that if a creditor has a valid, pre-petition lien, that lien “carries through” the bankruptcy proceedings. Dewsnup v. Timm, 502 U.S. 410, 112 S.Ct. 773 (1992).o [P]re-petition liability also would have been extinguished as a personal liability of the debtor. 11 U.S.C. § 523(a)(16).o That counsel should advise the debtor solely of the liability for fines or assessments which has accrued after the debtor filed her bankruptcy petition … up to the date of the Trustees Sale... Any other liability has been discharged.
  23. 23. Bankruptcyo What about voluntary surrender of property?
  24. 24. Jeremy O. Evansjoe@vf-law.com

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