Some area residents learning the hard way: Pay homeowner's association or else

Article Courtesy of The Palm Beach Post

By Kimberly Miller

Published June 27, 2011

Tom and Patrice Sherhag's foreclosure began with a missed quarterly HOA payment of $75 in October.

The assessment due to the Palmetto Pines Homeowners Association in unincorporated Boca Raton grew to $318 by the end of November, a charge that by then included a $25 late fee, a $35 "processing fee," 18 percent interest and $175 in attorneys' fees.

In January, the association filed a lien for the original $75 on the Sherhags' home and despite subsequent checks written for hundreds of dollars, snowballing court and attorneys costs have since upped the final bill to an estimated $4,605.

The actual debt owed the association: $80.25.

While homeowners associations are wielding foreclosures more often as a way to collect from delinquent owners, South Florida attorneys said it's still unusual for that kind of court action to be initiated on a minor debt.

The Sherhags, who bought their home nearly 15 years ago, are not in foreclosure with their bank.

"This is a trap. Once you're one month behind, it's 'I got you.' " said Andrew Smith, a Boca Raton attorney defending the Sherhags in the May foreclosure filed by the association. "Why target someone who is one month behind?"

And the Sherhags aren't the only ones with $75 liens in the working class community of nearly 900 homes. In the past five months, the Palmetto Pines Homeowners Association has filed 27 liens, 18 of which are for $75. About 30 

In the past five months, the Palmetto Pines Homeowners Association has filed 27 liens, 18 of which are for $75. About 30 foreclosure actions have also been filed during the same time period by the association.

foreclosure actions have also been filed during the same time period by the association.

Unable to catch up

While some of the homes are also in bank foreclosure, not all are.

Several messages left for association board members and the community's management company, Coconut Creek-based Spectrym, Inc., were not returned.

The law allows associations to go after debtors with foreclosure actions that make them responsible for paying legal fees. For some associations, especially those with units abandoned by investors, a repossession can be an effective way to regain lost dues by allowing it to take over the home and rent it out until a bank's more lengthy foreclosure process concludes.

But Smith questions the motive of doing an expensive foreclosure to collect small amounts, especially when the homeowner is trying to catch up.

Court records reflect that the Sherhags wrote checks totaling $275 in February and April in attempts to make good on the debt.

"This is why we urge our associations to educate their members that a delinquent amount can quickly balloon to three or four times what was owed once it gets to the attorney's office and the clock starts ticking," said Donna Berger, an attorney with the Margate-based Katzman Garfinkel & Berger. "That is why owners must communicate with their boards on these issues and get on a payment plan at once, if possible, to avoid legal action."

The Sherhags' $75 late payment appears to have gone almost directly to the attorneys. They received a letter from the homeowners association's firm dated Nov. 30 directing them to send a cashier's check or money order to the firm for $421.61, which included charges for January's assessment and a $25 late fee. Depending on when the firm received the money, the Sherhags could deduct the late fee and interest owed.

Christopher Barnard, who has lived in Palmetto Pines for more than a decade, missed quarterly payments in 2008. He subsequently wrote checks for at least $625, but the association won a foreclosure judgment against him in May.

"I kept trying to pay and they kept adding more bills, more assessments more fines," Barnard said.

Barnard said he worked with association attorneys to amend the final foreclosure judgment so his home wouldn't be sold at auction. A revised court record filed June 3 shows a total amount now due of $20,795, including fees and court costs.

"No one is trying to take anyone's house," said attorney Tamar Shendell, of Shendell & Associates, which represents the Palmetto Pines Homeowners Association.

But she would not say what the motivation is.

"There is no special motivation," Shendell said.

'Windfall for the lawyer'

In court records, the firm estimates it had spent 14.1 hours through June 6 handling the Sherhags' foreclosure. It says an additional 4.5 hours is necessary to complete the case. An affidavit submitted to support the attorneys' fees says $175 is a reasonable hourly rate, bringing the costs for legal work to $3,255.

"This isn't a windfall for the association, it's a windfall for the lawyer," Smith said.

Last year, Shendell & Associates was sued by a Broward County couple in federal court under the Fair Debt Collection Practices Act and the Florida Consumer Collection Practices Act.

The homeowners complained that their association lost a $125 December 2009 assessment check, and despite their writing a replacement check, a lawsuit filed in April 2010 against them was based on the alleged $125 debt.

But the debt had ballooned to $3,610 with attorneys' fees.

The case was settled before trial.

"The judge seemed to think both parties were not acting reasonably, which I don't agree with because it seemed crazy to me that a $125 assessment ended in foreclosure," said attorney Alex Weisberg of Weisberg & Myers, which represented the homeowners.

Neither Weisberg nor Shendell & Associates would comment on the settlement.

Offering alternatives

Eric Glazer, an attorney who specializes in homeowner association law with Glazer & Associates in Hollywood, said while it's unusual to pursue a foreclosure for small debts, he understands why some associations do it.

"The question becomes are you supposed to wait for two years of assessments to be late," Glazer said.

Still, he said there are alternatives, such as setting up payment plans.

"If you go through the very expensive route of foreclosure, $75 becomes 20 times that overnight," Glazer said. "Associations need to realize that people have fallen on hard times and these aren't just investors going delinquent."