Foreclosure Missteps Can End Up Costing Your HOA Clients

An HOA in North Carolina recently learned a tough — and expensive — lesson about the potential pitfalls of noncompliance with statutory requirements for foreclosure. As the result of a misstep not even truly of the association’s own making, the foreclosure was reversed, and the association wound up on the hook for the owners’ attorneys’ fees and damages (In re George).

Jennifer and Calmore George, the owners who were foreclosed on in this case, didn’t live in the home — their three daughters lived there while attending a nearby college. Jennifer visited the home on vacation, and Calmore usually visited only once a year or every few years. When they did visit, they slept in a study area on an inflatable bed.

In August 2016, the association filed a lien in the amount of $204.75 against their property for unpaid HOA fees. Less than two months later, a notice of hearing was filed, stating that the association intended to foreclose to collect the unpaid fees. The next day, a deputy sheriff served notice of the foreclosure.

But, when the deputy served notice at the home, he actually served one of the daughters, who said she was her mother. He left copies of the notice for Calmore with the daughter, too.

“From the HOA’s perspective, aside from having some notice that the owners didn’t live exclusively on the premises, the paper record looks pristine, like they did everything they were required to do,” says Zach Wilson, an attorney with Law Firm Carolinas who focuses on community association law.

The association initiated a nonjudicial foreclosure sale, and the property was purchased at auction in January 2017 for $2,650.22. The buyer subsequently sold it for $150,000 and began demolition work.

A month after that sale, the Georges went to court to set aside the foreclosure sale and the subsequent sale. They argued that they hadn’t been properly served.

In a new article, we’ll unpack the case to learn why the court ruled the way it did and discuss how you can protect your association clients from making the same mistakes by ensuring that they are complying with the legal requirements for foreclosure.

Read the full article here: Failure to Follow Foreclosure Rules to the T Can Cost Your Clients

Best regards,
Matt Humphrey
President

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