A 40 unit apartment building in Titusville, Florida caught fire four years ago and most of the units were severely damaged. Obviously, all those in the building lost their homes. But the Bay Towers Homeowners Association is now foreclosing on dozens of displaced fire victims because they haven’t been paying their HOA dues. Apparently, even if your home is destroyed by fire, your HOA dues in some cases could technically go on forever!
One homeowner, Mike McDaniel, acknowledges he owes $8000 in HOA dues. But he says he’s now being sued for $48,000 for a place he’s not even allowed to set foot in.
The developer has been fined by the City of Titusville for almost two million dollars for not repairing the fire damage. The developer, in turn, is suing dozens of the former homeowners like McDaniels in addition to suing the insurance company.
McDaniel’s attorney told reporters from WFTV that all the lawsuits could give the developer control of the condos. If so, he’ll probably eventually get a better price for them.
(Good reporting by WFTV. We need more HOA coverage like this!)
A reader at Evan McKenzie’s blog left a comment that’s so good, I’m just going to steal it and re-print it here :
This is the problem with permitting the HOA to be an intermediary between the residents and the utilities. The residents have the same problem when they pay the HOA. HOAs are not utilities and should not be permitted to act as a “middleman” between the residents and the utilities. The utilities are regulated as utilities, the HOAs are not and should not be permitted to act as utilities. Even if all the residents are paying, there is no obligation for the HOA to apply their assessment monies to the water bill! All too often the residents put their money into this “common hat” only to have the hat taken by other parties whether those parties are board members or HOA management companies. Sub-metering and direct billing would resolve this problem immediately.
Are we reading the same news? I’ve read where San Bernardino County is considering a proposal to use eminent domain to buy underwater mortgages, which in SBC’s case is nearly all of them, and then work with Mortgage Resolution Partners to rewrite affordable, reduced principle mortgages for the same homeowners.
Apparently, the plan works to get these mortgages out of the securities they’re tied into, which then allows them to be modified. According to the diverse backers of the plan, this will free the homeowner from foreclosure threats and stabilize housing prices.
It’s more like the poor (SBC) helping the poor (underwater homeowners). True, Wall Street is unhappy, but Wall Street and their innovative securitizations ideas were the main cause of the crisis, and they don’t seem to make sympathetic victims.
Sadly, Seashell, we’re looking at two different consequences of the same story. When eminent domain is used to take a home and make the government the new landlord, mortgage investors and lenders will be scrambling over each other to crawl out of the tar pit. With basically bankrupt cities using eminent domain to grab up properties the end result cannot be good for homeowners. A bankrupt city will not be able to keep its claws off whatever equity has been built up in the home. No, this skeptic cannot find a single case in the country where a private homeowner benefited by any kind of eminent domain seizure. Dana Berliner with the Institute for Justice did a survey of 10,000 eminent domain cases across the country. I think her book might even be available for free. When you have a piece of private property that can be taxed, seized, or sucked dry, the government is NOT your friend. It is NEVER your friend.
If this is the plan, it sounds good, but I don’t see how it is legal. How can the government take the house from the bank without paying the balance? It is not the governments place to interfere with private contracts. This could be the end of all our prooperty rights. As it is, many people underwater are walking away, or not paying, and the banks will be left holding a huge liablility, and no way to sell it for that amount. I don’t see the banks profitting from foreclosures. Their best bet is to allow short sales.
I’m fairly neutral on government as friend or foe, it is what it is, and not so neutral on the power of private HOAs . Looking over Dana Berliner’s surveys, it seems she focuses on the use of eminent domain for the benefit of private parties, as in Kelo.
In the case of San Bernardino County, eminent domain would not be used to seize the actual homes, only their mortgages. It’s certain investors and banks that stand to lose, not the homeowner (and I’m looking at this as an investor – a small one). The concept is not unprecedented and was covered by the Supreme Court in Hawaii Housing Authority v. Midkiff in 1984. The goal here is to reset the housing market back to the realm of realistic and believable.
The scheme is not perfect and it’s not clear that SBC can handle the intricacies without screwing up, but it’s an idea with potential, which is more than anything we have now.
And speaking of unbelievable, here’s a story of how a set of $2500 gates ended up costing $250,000 in a Florida HOA.