The number of foreclosed houses arising from foreclosure actions filed by homeowner associations has been rising in Myrtle Beach, South Carolina, based on data collected by South Carolina-based real estate research company SiteTech Systems.
In most cases, according to the research firm, the properties being targeted for foreclosure by the HOAs have been foreclosed by mortgage lenders. In these cases, HOAs only get their payments if the lenders have been fully paid and taxes have already been paid.
In 2008, a total of 461 foreclosure actions were filed by HOAs in Myrtle Beach, more than twice the number in 2007, when 181 foreclosures were filed. This year, a total of 260 foreclosure actions were filed by HOAs.
Most members of HOAs who received foreclosure notices over the past year have been surprised that HOAs have the authority to foreclose on properties. But according to lawyer Pat O’Dea who handles foreclosures for HOAs, the horizontal property law allows condo associations and other HOAs to put liens on properties or to use the foreclosure process to compel owners to pay the association dues.
O’Dea said that giving foreclosure notices to property owners and putting their homes in real danger of becoming foreclosed houses have been effective in collecting delinquent dues.
According to O’Dea, the typical foreclosure process for HOAs starts after property owners ignore at least four notices from the HOA office within a period of 3 months and fail to pay their dues after the final warning from the HOA lawyer.
Some HOAs however are more lenient, giving more time for property owners to pay their dues. Others warn owners by removing services like cable TV or the use of common facilities.
Chris Beseler, the HOA secretary of the Waterway Village, said that foreclosure is the last thing his association pursues to collect delinquent accounts. He added that foreclosure is a very excruciating decision to make especially for owners whose financial difficulties are caused by factors they did not cause or beyond their control.
But Beseler reiterated that the HOA needs to make difficult decisions to protect the whole community. He also explained that his HOA pursues foreclosure actions mostly on owners who refuse to communicate with HOA officers.
Many HOAs, however, reported that most foreclosed houses resulting from HOA actions were properties purchased by investors and second-home owners who have walked away after they could no longer sustain payments.