|Lawyer specializes in HOA cases|
Article Courtesy of The San Antonio Express-News.
Published April 22, 2005
When it comes to collecting delinquent property association fees from homeowners, Tom L. Newton Jr. handles far more accounts than anyone else in Bexar County.
In 2004, his signature was on the notice of foreclosure in almost 90 percent of all cases. By his own declaration, Newton says, "I'm just the best at it."
Dozens of homeowner associations call on Newton when their efforts to collect dues and fees are unsuccessful. If the accounts get delinquent enough, the association can actually foreclose on the house.
Newton files hundreds of lawsuits each year for "debt and damages," or for "notice of foreclosure." Of the 370 notices of foreclosure filed in 2004, according to Real Estate Foreclosures Inc., 53 actually went forward to a county auction. In most cases, the houses became the property of the homeowner association.
Investors rarely bid on homeowner association foreclosures at auction, said Real Estate Foreclosure publisher Gregg Stanley. Though it appears huge profits can be made — bids usually open under $3,000 for houses worth more than $100,000 — appearances are deceiving.
Homeowners have a 180-day grace period during which they can buy the property back. And the winning bidder is almost always in position behind the mortgage holder.
"You have to keep the title in your name," Newton said, for six months after the auction. "If the first lien is foreclosed, your investment is wiped out."
Homeowner associations, Newton said, don't really want the houses. The threat of foreclosure is supposed to make the system work. But if a homeowner doesn't respond, homeowner associations just end up with a bigger headache.
"I've had board members go knock on doors to get it taken care of," he said. "We've had people put on repayment plans."
In one typical case, Newton obtained a default judgment from a district court judge. The homeowner had missed three annual assessments, 15 late fees, 16 collection program fees and a lien before Newton filed a lawsuit.
But not all notice of foreclosure proceedings are a simple matter of delinquent annual assessments. David Kahne, a Houston attorney who represents homeowners, has been at the forefront of a Harris County-based movement to curb overzealous homeowner associations. Some homeowners accused Houston law firms of operating foreclosure mills.
"The number of mortgage foreclosures is much higher than the number of homeowner association foreclosures," said Tom Adolph, creator of HOAdata.org, a Web site that tracks Houston-area homeowner association court filings. "But the number of homeowner association foreclosure threats may be in the ballpark."
The average debt owed in lawsuits filed in Bexar County last year was about $2,400. But the attorney fee portion was usually $1,500.
"That's if they don't fight it," Kahne said. "If someone calls up and asks me, 'What should I do? They want $1,500, plus the assessment,' I have to inform them, yes, but if you fight it, it's going to cost you even more."
Kahne helped pass legislation in 2001 that prevented associations from initiating a foreclosure solely on the basis of deed restriction fines and attorneys' fees. But some associations then paid disputed fines with funds intended for annual assessments.
The remainder of the check would be short of the assessment amount, he said, and the association would use that as an excuse to initiate foreclosure.
Sen. Jeff Wentworth, R-San Antonio, has introduced a bill that says payments shall first be applied to delinquent assessments, then current assessments. Only after assessments are paid can the association apply payment to fines. The attorney gets paid last.
Kahne, who testified in favor of the bill before the Senate Intergovernmental Relations Committee, is optimistic it will pass. The bill came out of committee without amendments, has picked up four co-authors and has a companion bill in the House.
But Newton doesn't expect the bill to have much effect even if it becomes law. Any association that would apply payment first toward a deed restriction fine is violating "the spirit" of the current law, he said.
"Those kinds of problems, if they exist, are pretty rare," he said..