Congratulations! You’ve obtained a judgment against a homeowner for HOA dues – now what do you do?
Option 1: Settlement Agreement
The easiest, quickest, and least painful way to collect money is through a settlement agreement with the owner. In a settlement agreement, the association and the owner reach a mutually agreeable arrangement to pay the debt. This may include waiving some amounts or accepting payments over time.
Our general advice is that you should collect hard costs, which are assessments and any amounts paid out to a third party (attorneys, collection companies, etc.), but be flexible about late fees and interest, as these charges exist to encourage timely payment. Another common settlement tactic includes offering to settle for a lesser amount if paid in a lump sum. Insist on the full amount if you make payments over time.
Option 2: Writ of Fieri Facias (FIFA)
Unfortunately, few people in collections fulfill their responsibilities—that’s how they ended up in collections. The first step in collecting a judgment is to situate yourself to protect your interest in the property. You should have placed a lien on the property when the owner was first in collections. In turn, prevents the homeowner from selling the home without paying off the association.
Now that we have obtained a judgment against the owner, we want a writ of fieri facias (FIFA) or judgment lien to issue. While the previous lien recorded against the property secures the association’s interest in the property, the FIFA attaches to any other property owned by the homeowner in the county.
Getting the FIFA issued not only attaches to other properties the owner may have but also allows us to keep renewing the judgment until it gets paid. Judgments in Georgia are good for 7 years but may be renewed indefinitely through a short process involving the FIFA. You will also need the FIFA if you can and want to proceed with foreclosure.
Option 3: Bank Garnishment or Wage Garnishments
The FIFA, much like the lien, is passive. In order to turn that judgment into money, we most likely need to locate the owner’s asset information, either banking or employment.
In a bank garnishment, the garnishment is filed against the banking institution. On the day the bank is served, a 5-day freeze is imposed on all accounts with the owner’s name on it. All money coming into any account is held, and no debits are allowed.
Once the 5 days have passed, the bank will take all the funds in the bank account and pay it into the registry of the court. Once the funds arrive in the registry of the court, we will file the appropriate paperwork to have the funds paid over to our office to apply against the judgment.
Bank Garnishment Limitations
While a bank garnishment is a powerful option, it also has its limitations. Under Georgia law, certain types of money are exempt from a bank garnishment, depending on their source. The main exemptions are social security income, social security disability income, military or federal government pensions, and any Georgia state pensions. If the bank contains funds from any of these sources, those amounts will be left out of the funds paid into the registry of the Court.
Wage Garnishment
The other main type of garnishment we like to file is a wage garnishment, otherwise known as a continuing garnishment. This is filed against the homeowner’s employer, and requires the employer to withhold funds from each paycheck for up to 3 years, or until the judgment is paid in full.
Once the FIFA issues, we will check with the association to see if you have any banking or employment information about the owner. If not, we will submit the owner to an asset search to locate such information. Depending on the information we find, we will proceed with filing either a bank garnishment or a wage garnishment.
Option 4: Excess Proceeds
Another avenue for collection is through excess funds from lender foreclosure sales or county tax sales. If you fail mortgage payments, your mortgage company will start looking to foreclose on your house.
This is generally a threat to the HOA’s collection efforts. A foreclosure by the lender will cancel out the association’s lien. However, if the mortgage foreclosure sale results in excess funds over what is owed on the mortgage, the excess funds are distributed in order of lien priority, with the association often being second in line.
When this happens, the foreclosing law firm will send out a notice to all possible lien holders and invite them to make a claim. We keep a lookout for these notices after foreclosure. If we receive one on behalf of a collections matter, we will let you know and put in a claim on your behalf.
In a tax sale, the county auctions the property off when there are unpaid property taxes. The process is similar, except property taxes have a super-priority status. This allows them to jump in front of the mortgage and the association’s lien. In this case, the tax commissioner or county attorney may notify all parties of a potential claim.
Each county has a slightly different process for this. Regardless, if we receive notice, we will notify you and put in a claim on the association’s behalf.
Option 5: Association Foreclosure
Finally, the last way to collect that we are going to cover is an association foreclosing on its statutory lien pursuant to a judgment and order of foreclosure. This is an aggressive and expensive process, so we counsel associations to pursue this only if collection is not possible any other way.
In order to foreclose, the balance must exceed $2,000.00, and the association must send notice to the owner of the association’s intent to foreclose at least 30 days prior to filing suit for foreclosure.
The association will next need to file suit in the superior court and request a judgment against the owner along with an order of judicial foreclosure for the judgment amount. The case then proceeds similar to a typical collections case, but in the end, along with our judgment, the court will also enter an order giving us permission to foreclose on our statutory lien.
Foreclosure Process
Once the court has entered an order of foreclosure, our office will discuss with you the pros and cons of foreclosing. If you decide to proceed with foreclosure, our first step will be to request the FIFA, and once it issues, order a title search.
We then prepare a foreclosure package for the sheriff’s office, which includes the original FIFA and a title search, and request that the sheriff’s office schedule a foreclosure sale. From there, the sheriff’s office will send out a notice, advertise the sale, and actually conduct the sale.
Foreclosure Timing
Foreclosures in Georgia only occur on the first Tuesday of each month on the courthouse steps between the hours of 10am and 4pm. On the day of sale, one of our attorneys will attend the sale and credit bid on behalf of the association.
The Winning Bidders
If the Association is the highest bidder, we will arrange for the payment of costs. The Association will take the title to the property, subject to any higher priority liens. At this point, you would have the option of evicting the owner(s), reselling the property, or taking no action and waiting for the mortgage lender to foreclose.
If a third-party purchaser is the winning bidder, they will arrange for payment of the sheriff’s costs, and take possession of the property. Evicting the owners or reselling the property would become the third party’s problem, and the association would simply wait for payment from the sale and the identity of the new owner, which is typically available about 30 days after the sale.
The bottom line is, that foreclosure is an aggressive collection remedy which involves divesting the owner of property title. It’s also risky because the association could incur all these costs for foreclosure, and then the mortgage company could foreclose over you and take the property away. For all of these reasons, foreclosing on the association’s statutory lien should be reserved for those hard-to-collect owners whom we can’t collect from in any other way.
Contact Nowack Howard
You and your association deserve a partner to help you evaluate the different collection remedies and decide the best way to proceed. Contact us today to help you navigate your options and help you move forward!
