Once the foreclosure sale takes place and the property reverts to the HOA, the homeowner has a 90 day right of redemption pursuant to CA Civil Code section 5715(b). Should the homeowner fail to redeem the property within the 90 day redemption period, below are the HOA's post foreclosure options:
Cash For Keys:
The HOA may offer the occupant of the property a specified amount of money in exchange for vacating the property within a specific amount of time and leaving it free and clear of personal property and trash. This option is usually less costly and less time consuming than an eviction but the occupants do have to agree to it.
Often times the HOA’s only option is to evict the occupants. The timeline and cost for evictions can differ depending on what County the property is located in and who the property is occupied by. Our office and the attorneys that we use are very skilled with both tenant occupied and former owner occupied evictions. Some Counties such as Los Angeles County and its unincorporated areas have very specific laws concerning tenants. We are also very well versed in these laws and can walk you through your options as well as the procedure step by step.
If the property is tenant occupied, the HOA may want to consider renting to the tenant as this will help them collect monies to put towards the past due balance while waiting to see how the senior lender proceeds. In Los Angeles County and the surrounding unincorporated areas, if the property is tenant occupied, you must honor the current lease and once the lease has expired, you must extend it for another year. If the lease is month to month, you must continue to rent month to month until either you are personally planning on occupying the property in which case you can give a 90 day notice to quit or until the tenant fails to make rental payments under the terms of the lease. Our office can collect the rents for you and if the payments are late or if the tenant stops paying, we will send out the applicable notices and begin the eviction process.
Just as the former owner can short sale his property before the HOA takes title, the HOA may also market and try to short sale the property once they take tile. This will be dependent on the senior lender as to whether or not they are willing to work with the HOA but it does not cost the HOA anything to try.
In the event that the property does have equity in it, the HOA is able to sell the property in a standard sale. The up side to a standard sale is that you can pay off the senior lender in full and not have to negotiate a short sale and the HOA gets to keep any excess funds above and beyond what is owed to the senior lender. Our office is able to help you determine whether or not the property has any equity.
S.B.S. and our sister company Platinum Real Estate Network, Inc. are happy to help you with all of your post foreclosure needs.
Frequently Asked Questions
Is the HOA required to make payments to the Senior Lender(s)?
NO, the Lender(s) have the same foreclosure rights as the HOA did when the HOA foreclosed upon their Lien. The Lender(s) cannot demand payment from the HOA nor has any additional recourse against the HOA.
If the HOA enters into a purchase agreement with a buyer and the proceeds do not fully satisfy the Sr. Lenders debt does the Sr. Lender have any recourse or ability to demand the deficiency from the HOA as the owner?
NO, as stated above, the Sr. Lender’s only recourse is to foreclose on the property pursuant to the terms of the note and deed of trust executed by the borrower. In their foreclosure action, statute or otherwise does not provide a means wherein the Sr. Lender can directly pursue the HOA for any monies.ments to the Senior Lender(s)?
What if the property is vacant during the 90 day right of redemption?
The HOA has the right to secure the property from damage and vandalism, but cannot remove any personal property until the 90 day redemption period has expired and the TDUS has recorded.
What if the HOA has been informed of a buyer for the property? Can the HOA rent the property to a tenant?
Yes, the HOA has all of the ownership rights of the property and can enter into a rental agreement with a tenant. We recommend the HOA have their insurance carrier review the insurance policies for proper coverage.
If the HOA enters into a rental agreement with a tenant, is the HOA required to make payments to any Sr. Lenders?
NO, there is a term that is used called “rent skimming”. Rent skimming as used in this scenario is not illegal and does not create any additional liability to the lender. The HOA is deriving cash flow from a property that has been foreclosed by the HOA. The HOA’s goal should be to have the Lender foreclose ASAP to become the responsible party for monthly dues or get the property sold to a new homeowner. Until that transaction completes, the HOA is allowed to rent the property and derive any cash flow possible without creating any liability to the Sr. Lender. We recommend the rental agreement with the tenant clearly disclose the HOA will not be paying the Lender and the Lender MAY eventually foreclose and extinguish the rental agreement. Full disclosure minimizes liability.