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Homeowners associations pose tough questions for real estate lawyers in Utah

March 13, 2014

Utah is home to a unique mix of tourist areas, rural communities and urban neighborhoods with a myriad of residents from long-time Utahns to second home owners who fly in for the mountain winter. One thing is constant, though: Utah is growing, and oftentimes new housing developments are built in secure, gated communities with HOA oversight. One resident in nearby Nevada posed an interesting question to an expert in this Review-Journal Q & A, and the answer might be intriguing, though it probably wouldn’t take real estate lawyers in Utah by surprise.

The inquirer discussed living in a gated community of 154 townhomes and behavior by an HOA board member. Residents of the townhome had unpaid assessments. Subsequently, an HOA board member forced his way into their home, threatened the occupants and changed the locks when the residents were away. The bank had a note on the property, and the HOA foreclosed on the home through a collection company. The inquirer wants to know who owns the house now? And who is responsible for it?

Real estate lawyers in Utah might be raising their eyebrows at this point in the story, as the Review-Journal’s expert (a certified property manager, broker, and supervisory certified associated manager as well as president and owner of a realty and management company in Nevada) reiterates that, “no board member should ever enter a home and change the locks without proper due process, and certainly not threaten the occupants. That is asking for a big lawsuit.”

The expert goes on to explain the legitimate eviction process through the constable’s office. But if the association properly foreclosed on the home, then yes, it would have a foreclosure deed, which would mean it would own the house even if there is a mortgage on the home. The legal issue that real estate lawyers in Utah representing clients in a similar situation would face is whether the foreclosure extinguishes the first deed of trust if the lender, when properly notified, did not pay the nine-month superlien. The Nevada Supreme Court is still deciding that matter, but real estate lawyers in Utah would know the applicable law for their state and client’s interests.

The Review-Journal expert states that the HOA would also have the right to lease out the unit at this point, in addition to being responsible for insurance, property taxes, utilities, sewer, trash and maintenance to some extent, as holders of the deed. The HOA would encounter some restrictions on selling the house, however, until the mortgage was paid off—assuming that the associations lien does not extinguish the bank’s loan.

For owners of second homes, fractional or timeshare properties located in Utah who reside out of state, the whole process of encountering real estate law can be mind-boggling, as one similar Nevada resident witnessed in her HOA managed neighborhood. Being able to rely on someone trustworthy when navigating these matters is essential.

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