Potpourri
Foreclosure
Charges & Restriction of Rights
Bankruptcy & Excess Proceeds
Justice Court Lawsuits
100
A trustee has ___ business days to record the Trustee's Deed, after receipt of payment: (A) 1 (B) 6 (C) 7
(C) 7. A.R.S. 33-811. (A) & (B) are both incorrect Notwithstanding the above, there remains a delay in the recording of trustee's deeds and the association has relatively little recourse to pursue a trustee for failing to record their trustee's deed within seven days of receipt of payment. Until the trustee's deed has been recorded, the owner remains the owner of the property.
100
The minimum threshold to file an association lien foreclosure lawsuit is: (A) $1,200 in assessments only or no payments for a year (B) $1,200 in violations or no payments for a year (C) $1,200 in charges or no payments for a year
(A) AZ law requires that an owner owe at least $1,200.00 in assessments only or that the owner have failed to make a payment in a year. As a result some associations with relatively high assessments ($900.00 to $4,000.00) a month foreclose within 60 days or so, while others with relatively low assessments may be forced to wait out the entire year before filing foreclosure suit. Both (B) & (C) fail to limit the threshold to assessments only, therefore they are both incorrect.
100
What is the maximum late fee that can be imposed in a planned community? (A) Lesser of $15.00 or 10% “of the amount of the unpaid assessment” (B) Greater of $15.00 or 10% “of the amount of the unpaid assessment” (C) No limits - check your documents!
(B) Greater of $15.00 or 10% “of the amount of the unpaid assessment” A.R.S. 33-1803(A). (C) Applies to condominiums (A) Red herring
100
Filing a bankruptcy petition stays all actions to collect pre-bankruptcy debt during the pendency of the bankruptcy? (A) True (B) False
(A) True - a debtor's filing of a bankruptcy petition triggers the automatic stay, and the stay remains in place during the pendency of the bankruptcy. Violations of the stay can result in serious negative consequences.
100
Advantages of a personal money judgment lawsuit over foreclosure include: (A) No minimum threshold to file suit (B) Typically faster and less expensive (C) Both A & B
(C) Personal money judgment lawsuits are filed in Justice Court. The law does not impose a minimum threshold that a debtor must owe prior to suit being filed (unlike foreclosure), default judgments can result in three to four months (whereas foreclosure judgments can take four to nine months) & they cost about 1/3 in fees & costs compared to a foreclosure lawsuit
200
Owner is attempting to "short sell" their property. Owner offers 1/2 balance owed. The Association: (A) Is obligated to accept the offer (B) Has discretion to accept/reject/counter at its discretion
(B) The Board has discretion. A good rule of thumb is to accept 1/2 to 1/3 of the balance owed, if the alternative is pursuing the owner and investing more time and monies given the associated uncertainty. If the owner is facing a possible trustee's sale, the Board should seriously consider whatever the short sale offer is.
200
Foreclosure should be strongly considered in which of the following scenarios: (A) Non-consumer entity (LLC/corporation/trust) (B) Owner remains "judgment proof" (no wages or assets to garnish) (C) Both
(C) Both. Foreclosure typically makes a lot of sense when dealing with situations where there may be insufficient AZ assets to pursue. This can include: Owners who reside out-of-state (with no AZ assets) Non-consumer entity (LLC/corporation/trust) Unemployed/self-employed/retired Situations where the owner has disappeared and cant be located for service purposes Owner is paying the mortgage but not the HOA High assessments (upscale condo) Mortgage is delinquent but lender isn’t taking action
200
When is a payment deemed late in a planned community, unless the documents impose a longer period? (A) 14 days (B) 15 day (C) 30 days
(B) 15 days. A.R.S. 33-1803(A). Documents can provide for a longer but not shorter period, so if your documents authorize you to impose a late fee on day 10 - that's a "no go" and it reverts to 15 by operation of law
200
If an owner receives a discharge in a Chapter 7 bankruptcy (no asset case) but fails to list the association as a creditor, is the owner's pre-petition debt generally deemed discharged regardless? (A) Yes (B) No
(A) Yes. 9th Circuit case law provides that in a no asset case (where the Bankruptcy Trustee determines nonon-exempt assets are available to sell to satisfy the debt) that this is the result. Most Chapter 7's are no-asset cases.
200
The statute of limitations on personal debt is... (A) 3 years (B) 5 years (C) 6 years
(C) 6 year compared to the three year limited imposed in association lien foreclosure. This can make pursuing a personal money judgment lawsuit potentially more attractive, as the association can pursue more of the debt, assuming the owner remains collectible. (A) applies to association lien foreclosure (B) is a red herring
300
Owner passes away leaving a delinquent HOA balance. A relative who is not on title. resides at the property. The Board's remedies are: (A) Sue the on site relative (B) Sue the estate (C) Both (A) & (B)
(B) Sue the estate. This could take the form of a claim against the estate or association lien foreclosure. Please note that there a time limits to file a notice of claim in an estate. It is generally a good idea to reach out to the personal representative or attorney to figure out the family's intentions with regards to the property. (A) is incorrect as the Association has no legal relationship with the on site relative - only the deceased owner.
300
Parties that an association conducting an association lien foreclosure can name to foreclose their interests include: (A) 1st mortgage (B) 2nd mortgage (C) Both
(B). The Association's assessment lien is generally superior to all other creditor interests except, 1st mortgage/deed of trust, property taxes, governmental assessments, and some IRS tax liens. This can result in the Association "freeing" up potential equity in a property. As a result, we don't name the 1st mortgage because they "don't care" - their credit interest remains unaffected by any action the association takes. As a practical matter it can be almost impossible to communicate with an institutional lender as well.
300
As a general rule, boards should consider waiving "soft" costs such as late fees, violations, and pre-judgment interest to facilitate collection of dues and other out of pocket expenses. (A) True (B) False
(A) True. While the association may be entitled to pursue these charges, the goal should be collection of the unpaid dues. We recommend waiving these charges, when it makes sense. Examples of administrative ways to approach waivers are: -Unrestricted “No Limits” -Up to a Maximum of $__________ (for example $100.00) -Up to a Maximum of __________ % (for example up to 50%) Approaching waivers in this manner helps ensure that all owners are being treated uniformly. This can be particularly helpful in the event an owner claims that they are being treated differently.
300
If an owner files for bankruptcy protection, but remains the owner, can the association separately pursue the owner for the assessments that accrue after the filing of their bankruptcy petition. (A) True (B) False.
(A) True. The bankruptcy code provides that a debtor cannot discharge post-petition assessments. As a general rule it is preferable to wait out the bankruptcy if it is a Chapter 7 case as they can be resolved within 3 to 4 months. However, if the association is considering foreclosing, the association probably needs to obtain the permission of the Court prior to doing so, as the property will likely be considered part of the bankruptcy estate.
300
Prior to filing a personal money judgment lawsuit, of the following, which is the most important consideration? (A) Whether the mortgage is current (B) The owner's credit report (C) Both
(B) The owner's credit report as we are pursuing the owner personally - not the property. Therefore the status of the mortgage while interesting is not critical (as say if we were pursuing foreclosure). Therefore (A) and (C) are incorrect. Additional factors to research include bankruptcy status, whether they are of working age (for collection purposes), whether they filed for bankruptcy protection, whether they are active duty servicemembers (because as a practical matter they can be impossible to collect from), how much they owe, what category of charges is owed (assessments versus fines only), and the owner's payment history.
400
Active duty service members who reside stateside are not entitled to most of the same protections afforded active duty service members under federal law. (A) True (B) False
(B) False. Active duty servicemembers are entitled to the same protections, regardless as to whether they have been deployed
400
Once the foreclosure judgment has been obtained and the Sheriff's Sale has been held, how long does the owner typically have to pay-off the balance and avoid losing title to their property? (A) 45 days (B) 6 months (C) 9 months
(B) Typically six months. This period after the property has been auctioned off by the Sheriff's Office ("Sheriff's Sale") is referred to as the redemption period. During this period, the owner can continue to reside therein. If the owner fails to redeem, the Sheriff's Office will issue a Sheriff's Deed to the successful bidder. At this point if the owner has failed to redeem and continues to reside in the property, the owner can be evicted by the new owner who holds the Sheriff's Deed. Fortunately this is a relatively rare occurrence (1 in every 350 foreclosure cases).
400
If an owner tenders a check as "payment as payment in full", but the owner's check is for less than the amount due, and assuming the check was cashed (i.e. it went to the lockbox), how long does the Association have to refund the monies to the owner? (A) 30 days (B) 60 days (C) 90 days
(C) 90 days. In order for an owner to successfully assert the defense of accord and satisfaction by instrument, an owner must do so in good faith, there must be a bona fide dispute and a "conspicuous" writing accompanying the check. It is difficult to envision how an owner who owes assessments only could successfully allege a bona fide dispute over the assessment balance owed (they are what they are) absent a showing that the association's accounting is unreliable. It is also not clear whether simply writing "payment in full" in the memo section is sufficient to trigger the defense. Generally we reach out to owner's first and resolve 95% of these potential disputes because the owner didn't really intend to dispute the debt. Regardless the association has 90 days to refund the monies. A.R.S. 47-3311.
400
If a current owner files for Chapter 13 protection but fails to provide for repayment of the charges secured by the lien, what should the association do? (A) File a proof of claim (B) File an objection to the plan (C) Both (A) & (B)
(C) Generally you always should file a proof of claim to ensure that the association's lien amount remains secured. Here, the owner failed to provide for the association's charges, hence the need to file an objection to the debtor's plan. Failure to do so, could result in the association losing some rights (these situations are fact intensive).
400
The maximum principal amount that a Justice Court Judge could award (excluding attorney's fees and costs) is : (A) $ 5,000.00 (B) $10,000.00 (C) $15,000.00
(B) $10,000.00. Courts can and do award fees and costs in excess of this amount, i.e. a principal judgment of $10,000.00 and an additional $3,500.00 in fees and costs. As a general rule the longer a creditor such as the association waits to get paid, the harder and more expensive it is to collect. Therefore, if the association finds itself pursuing high dollar accounts, this could be an opportunity to re-evaluate the collection policy. Therefore (A) and (C) are incorrect.
500
The purchaser of a Certificate of Purchase ("CP") is entitled to foreclose after ____ years from purchase? (A) 3 (B) 2 (C) 5
(A) 3 - the holder of a CP is entitled to foreclose 3 years from the date of purchase. Tax lien foreclosure can wipe out the Association's lien. Tax lien foreclosure can result in an owner holding an association hostage.
500
Owners challenge association lien foreclosure lawsuits, on average ___ time (A) 3% (B) 6% (C) 8%
(A) Owners typically challenge an association lien foreclosure lawsuit, about 3% of the time. The vast majority of association lien foreclosures are handled unopposed. This helps cases move along quicker and helps to minimize the potential fees and costs. The timeline to obtain a default foreclosure judgment varies depending upon the number of defendants, the difficulty encountered in serving them, whether any defendants contest the lawsuit and the Court's calendar but from filing of the lawsuit to obtaining judgment it generally runs four to six months.
500
If an owner's account is delinquent, an owner's right to vote is automatically suspended under AZ law: (A) True (B) False
(B) False. AZ law doesn't address this issue. Your documents, may... but even then they typically require some form of affirmative action i.e. a "finding" before such as suspension occur. Other examples of restricting access include utilities (water trickle), and access to gates (inconveniencing residents), and amenities (pools/recreational centers).
500
If a lender conducts a Trustee's Sale (lender foreclosure) of the property, and the property at auction sells for more than the balance owed the lender, can the association assert a right to these monies? (A) Yes (B) No
(A) Yes - these are termed excess proceeds. The law provides that Association's have a right to recover unpaid dues and related charges from the monies that the trustee deposited with the County Treasurer and further authorizes the association to request a refund of the collection fees and costs incurred in applying for the charges. These applications are generally processed in six to ten weeks and are generally unopposed because the law preserves the association's creditor priority (e.g. the association remains ahead of the owner).
500
Personal money judgments can be collected by which of the following means: (A) Wage garnishment (B) Judgment lien (C) Both
(C) Both. Personal money judgments can be collected by garnishing an owner's wages or bank assets. In addition, the judgment can be recorded as a judgment lien which would attach to any property titled in the debtor's name in the county where the judgment lien was recorded. Recording a judgment lien makes sense when the judgment is not immediately collectible. For reference purposes, personal judgments can also be collected via rental garnishment, debtor's examination, and a general writ of execution, however, wage garnishment remains by far the most preferable option because there is much less risk and expense involved.
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