We have recently received the Sherriff’s Deed in Kansas for a foreclosure home. The lender did not pay the HOA lien and is stating they never knew about the lien from the HOA. The previous owner filed Chapter 7 in July 2011 and his previous dues were discharged. Then the HOA added back the amount of the dues they discharged about 8 months later. The dues have been accruing since July 2011 with an outstanding balance of 13, 883. The HOA will not let us take title to the property until we pay the previous owners lien. It is my understanding that in a Chapter 7, the previous owner has to pay the dues accrued until the property is foreclosed on. That would mean that we would only be responsible for the dues moving forward this month. It seems like the HOA should be suing the previous owner for this amount and not trying to collect from us? How should we respond to the HOA? Will a title company give us title insurance if that lien is still attached to the property or former owner? There are so many aspects to this that seem fishy.
I’m not familiar with the laws in Kansas, but if the law is similar to CA (albeit CA is a non-judicial foreclosure sate and Kansas foreclosures must go through the court - hence a Sheriff’s Deed is issued) then the HOA lien would likely be wiped out to the auction buyer (you). This presumes the HOA lien is junior (recorded after) the loan you purchased at the Sheriff’s Auction. Most HOA liens are junior, but double check the recording date to be sure it was recorded after the loan you purchased. The lender would not be responsible for the HOA dues, as that falls to the prior owner. Nor are you responsible. You should be able to record your Sheriff’s Deed and thereby take title. So I’m not sure how the HOA is preventing you from taking title? However, if the HOA (or their designated collection company) refuses to remove the lien, then your title could be “clouded” and might make it difficult to resell the property. That clearly IS an issue that needs to be resolved. But, based on my general understanding of the law, you are NOT responsible for, nor obligated to pay, the former owner’s back due HOA fees. I would get ahold of a copy of the Kansas code covering foreclosures and highlight the section which notes that junior liens/loans are NOT the responsibility (i.e. wiped out) of bonafide purchasers for value at Sheriff’s Auctions when the loan acquired is senior to (recorded before) the aforementioned junior debt. Send that code in a certified letter to the HOA and demand that they remove the lien. They can still go after the prior owner for the back due amount, but you should not be subject to their extortionist collection tactics.
I would recommend that you find a copy of the HOA CCRs. Banks will usualky not provide loans if an HOA has seniority so most CCRs have language that a foreclosures by a lending benificiary releases a delinquency off the property. Search hard for that language in their docs.
A similar thing is happening with me. We are purchasing a foreclosure just found out the prev owners havent paid hoa dues in 2 yrs. Our attorney is trying to say we are responsible for the $2500 in unpaid dues. We are supposed to close nov 21st and this doesnt make sense. How do i fight this?