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Georgia: Three Types of HOAs

by Stuart S. Gordan
McCalla Raymer, LLC -USFN Member (GA)

Homeowners associations in Georgia come in one of three different forms. First, a condominium is organized in accordance with the Georgia Condominium Act (GCA) codified at OCGA 44-3-70, et seq. Second, an association may submit itself to be created and governed by the Georgia Property Owners Association Act (POA) codified at OCGA 44-3-220, et seq. Lastly, a homeowners association that did not opt-in to the POA may be created by common law (HOA).

In all three instances, the associations have the right to lien properties for non-payment of assessments, special assessments, dues, fees, and/or charges. Associations subject to the GCA and POA enjoy the benefits of an automatic statutory lien, and are not actually required to file a paper lien with the land records of the county to protect their rights. An HOA, though, is required to file and record a lien in order to disclose to third parties that a specific property is delinquent in its payment. However, one researching an HOA should be certain to review the recorded covenants for the association and obtain a payoff letter from the association’s representative. In most instances, a first position security deed, or mortgage, takes priority over an association lien, and often the association’s own recorded covenants subject themselves to the first position security deed.

For properties subject to the GCA and POA, when the foreclosing lender is the successful bidder at the foreclosure sale, then the lender is responsible for paying a prorated portion of the annual assessments for common expenses from the date of foreclosure to the date of the REO closing. In addition, depending on the recorded covenants or board resolutions, there may be additional special assessments or other charges to be paid. Typically, assessments for foreclosed properties have not been paid so, in addition, the associations are able to collect up to a 10 percent late charge, a 10 percent annual interest charge on unpaid assessments, plus the costs of collection including reasonable attorneys’ fees.

For properties in an HOA, the REO seller is responsible for the prorated portion of the annual assessments from the date of foreclosure to the date of the REO closing, late charges, interest up to 18 percent, and the costs of collection. Again, when a property has been foreclosed, it is common for the former borrower to not have paid recent assessments. And while the REO seller pays those dues that accrue after the foreclosure date, the delinquent assessments from before the foreclosure date are not paid by the foreclosing lender or the new REO purchaser.

In Georgia, practically all properties subject to the GCA are represented by management companies. Of those subject to the POA or belonging to an HOA, there seems to be a mixed bag as to whether they are represented by management companies or simply managed by resident volunteers. But of the properties represented by management companies, there certainly is a recent trend to collect as many fees as possible at the REO closing from both the seller and the purchaser. These fees are termed statement fee, letter fee, document preparation fee, transfer fee, deed fee, initiation fee, capital contribution fee, foreclosure fee, and so on. And while in the past each type of fee may have been collected from either a purchaser or seller, many associations are collecting these fees from both parties now. Further, even when the association’s very own recorded covenants refer to or imply that a fee, such as an initiation or a capital contribution, is to be collected from an owner-occupant, now the fee is being charged to foreclosing lenders as well.

An interesting side note related to those properties subject to the POA: When preparing for an REO closing and requesting a payoff letter, once a qualified written payoff request is made, the association or representative management company has five business days to provide such a payoff. The response is binding on the association, and the absence of any reply relieves the REO seller of the responsibility to make payment.

© Copyright 2011 USFN and McCalla Raymer. All rights reserved.
Spring 2011 USFN Report

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