We purchased our home last August as a foreclosure from Fannie Mae and were told by the title company at that time that there were no back taxes or dues associated with the property. It is now March and we recently recieved an invoice from the HOA saying that we owe back dues for the last four years. The problem is that the HOA never put a lien on the property, so the debt was never made public record. The title company said that because there never was a lien on the property they are not resposible for the bill. Fannie Mae was never approached by the HOA with this bill until a month after we purchased the property so of course they won't pay it either. What do we do?
Please note that this answer is for informational purposes only and does not create an attorney client relationship nor is it provided as legal advice. I am not a member of the Washington bar.
First I think you need to seek the advice of a real estate lawyer in your area. The first question that lawyer will want to know the answer to is whether or not you obtained title insurance when you purchased the property. So pull out your closing papers and look for the policy. IF you do not find a title insurance policy, pull out our closing statment, sometimes called a HUD-1. Review items under 1100. Title Charges. Specifically items 1108, 1109 and 1110. If there is a charge for owners title insurance (1110), then you have paid for a policy and the title company must produce it. You need to get a copy and bring it to an attorney in your area.
If you have title insurance you may have a claim under your policy. If you do have a claim, you have an obligation to inform the title underwriter (not your local title agent, the company standing behind your local title agent) that you may have a claim as soon as you are aware of the potential claim. Don't rely on your local title company to take care of making the claim for you.
The Fannie Mae mortgage was highly likely to be a first priority mortgage/Deed of Trust (for purposes of this discussion I will refer to it as a mortgage)
Questions you need to ask your local attorney:
1. Is it possible for HOA assessments in your state to have priority over a first mortgage?
2. Under what circumstances?
3. Did the lender have to go to court to foreclose the mortgage (called a judicial foreclosure)?
4. IF the answer to question 3 is yes, and if the assessments did not have priority over the mortgage, was the association named in the foreclosure suit to be foreclosed out? Was it possible to foreclose out the HOA's interest?
5. If Washington State is a non-judicial foreclosure state, what is the procedure to foreclose and what is the status of HOA liens in a non-judicial foreclosure?
6. If it was foreclosed out, Is the HOA making an illegal attempt to collect a debt?
7. A title examination should have disclosed the existence of a Declaration of Covenants creating an obligation to pay HOA assessments. The declaraton should be listed in Schedule B of your title policy. In Washington what is the responsiblity of the closing agent to contact the HOA to determine if there are any assessments owed, and to obtain an estoppel letter? An estoppel letter in plain language is a letter from a creditor documenting what is owed, how it was caculated and either a per deim payoff, or sufficeint information for the recipient to calculate the per diem. Usually a closing agent collects money at closing to pay off that debt.
8. Did the closing agent obtain an estoppel letter? Was it collected for at closing (probably not in your case).
9. What is your recourse against a closing agent who fails to obtain an estoppel letter?
10. Is the closing agent's failure covered by your title insurance policy? Was there a closing agent's letter of protection issued by the underwriter and did its terms cover you, the purchaser?
11. Is title insurance a regulated industry in Washington? What title insurance regulations, if any, apply?
Finally, if you have a copy of the title policy, there should an address or phone number of the title underwriter or both to contact the underwriter in case of claim. You (preferrably your attorney) should send a copy of the policy and the demand letter to the underwriter to put them on notice of the claim and demand that they cover it. The underwriter is probably not your local title agent.
