MINNESOTA – Are HOAs Taking Advantage of Mortgage Servicers?
DSNEWS.COM: Are HOAs Taking Advantage of Mortgage Servicers?
By Brian H. Liebo and Kevin Dobie
April 7, 2017
While Homeowner Association (HOA) liens for unpaid assessments typically have priority over second mortgages and other junior liens (because the HOA liens may “relate back to” the HOAs’ previously-recorded declarations), first mortgages receive special treatment in various states, such as Minnesota. Despite that special treatment, HOAs often demand payment of substantial bills by lenders foreclosing first mortgages. In addition to the regular monthly dues, the HOA bills may come riddled with line items for special assessments, attorneys’ fees, late charges, interest, and more attorneys’ fees, late charges, interest, and more that may not be the responsibility of the lender to pay. When the bills threaten to delay sale closings, lenders must quickly decide whether to pay the bills or delay matters, potentially losing sales, to challenge the HOA’s invoices.
As an example, Minnesota law generally provides a clear outline of what charges must be paid by foreclosing lenders. The foreclosing lender for a first mortgage is only required to initially pay the “unpaid assessments for common expenses levied which ‘became due,’ without acceleration, during the six months immediately preceding the end of the owner’s period of redemption.” The lender is not responsible for late charges and attorneys’ fees assessed during or prior to this six-month look-back period, because the Minnesota HOA statute specifically omits these amounts in the list of allowed charges. Read more: