Most associations can foreclose on owners who haven't paid their dues

A recent court ruling strengthens the ability of many homeowners associations to file a lien or even foreclose on the home of owners who are behind on their monthly payments.

Q. I live in a large townhouse development and serve on our homeowners association's board of directors. Several of the owners here are far behind on their monthly dues that are supposed to be paid to the HOA, so our association's financial reserves are shrinking and we've had to cut back on maintenance and delay several planned projects that include the installation of new roofs. Can we foreclose on these delinquent dues-payers?

A. Yes, the board probably can foreclose on the delinquent owners, but only if that power is included in the HOA's guiding bylaws or its set of covenants, codes and restrictions. Bylaws establish how the HOA itself must operate, while the CC&Rs determine the rights and responsibilities of the development's individual property owners.

If neither of these documents currently grants the board foreclosure power, a majority of all the owners in the housing complex likely would have to vote to add it.

A recent case decided by the Nevada Supreme Court bolstered the rights of HOAs to file liens against the homes of delinquent owners and, ultimately, begin foreclosure proceedings if the back dues aren't quickly repaid. It pitted the Southern Highlands Community Association against Bank of America, the latter of which also was represented by lawyers from the powerful Mortgage Bankers Association.

Nevada is one of 21 states in the U.S. that allows a lien filed by an HOA to take precedence over the bank who issued the mortgage on the home. The Southland Highlands association foreclosed on the home and auctioned it off for a mere $6,000 to recoup the owner's unpaid dues, even though the loan on the home had a balance of about $885,000. Bank of America took a huge loss.

The case eventually could be appealed to the U.S. Supreme Court. But while most HOAs have applauded the September decision, it's not necessarily a "win-win" for folks who plan to buy a townhouse or condominium in the future: Experts say that banks could start charging higher rates or fees to compensate for their higher risk of losses, and all taxpayers could be on the hook if a bank or the various government agencies that back mortgages must be bailed out.

Q. We live in a house that was built in the 1950s. Our ceramic bathtub is in good shape, with no cracks or leaks, but it's got a lot of stains that just won't come out despite how much we scour or what cleanser we use. It looks disgusting. Replacing it with a new one would cost more than $2,000 (way more than we can afford) but we don't want to get one of those cheesy fiberglass tubs either that sell for $300 or $400 at home improvement stores. Any ideas?

A. Sure. I was faced with the same problem a few years ago, when my daughter didn't want to take a bath or shower in her bathroom's crummy-looking tub even though it was perfectly sterile.

New cast-iron or ceramic bathtubs can easily cost more than $2,000 or $3,000, especially after installation fees and haul-way charges for the old tub are levied. Pre-molded, fiberglass tubs can be much cheaper to buy, but they might not look as nice, and you'll still have to pay those pesky installation charges and haul-off fees.

My solution was to call a local tub-refinishing company that was recommended by a neighbor. For about $550, the contractor patched two small cracks in the tub, sanded it down, and then re-enameled it with a finish that has a 20-year guarantee.

I saved a lot of money, and the job was done in less than two days. I also had my choice of 24 colors: I wanted the same ol' white, but my teenage daughter wanted mauve.

You can guess who won. I took some of my savings and used them to buy matching window curtains and towels for her "new" mauve tub.

Q. If I create the kind of money-saving living trust that you often recommend and then put the title to my house into it, would it trigger my mortgage's due-on-sale clause and require that I pay the entire balance of the loan off in a single lump sum?

A. It's unlikely, unless you have a very strange mortgage contract.

When you create a living trust, you're essentially just changing the way you hold title to the property so your heirs can avoid the time and expense of probate court after you die. It's not a sale, so the lender generally can't enforce a due-on-sale clause and require that the loan immediately be paid back.

For a more definitive answer, contact your bank's customer-service or legal department.

Real estate trivia: The nonprofit Community Associations Institute, which represents more than 330,000 HOAs nationwide, says that about 66 million Americans live in a home that's governed by an HOA. That works out to about one of every five people.

• For the booklet "Straight Talk About Living Trusts," send $4 and a self-addressed, stamped envelope to David Myers/Trust, P.O. Box 4405, Culver City, CA 90231-4405.

© 2014, Cowles Syndicate Inc.