Found out HOA put on a lien on house 2days b4 closing

My husband and I are under contract to buy a HUD home.  Two days before closing we found out that the Home Owner's Association put a lien on the property for $16,000.  Now our closing has been postponed indefinitely!  Apparently HUD owes them association fees on the house.  HUD is trying to negotiate with the Association but the Association is not budging.  They want ALL of their money.  HUD is refusing to pay and we are stuck in the middle with no end in sight.  Now we have been told it could take up to a year to finish this.  We moved out of the home we were renting so that we could move into our new home.  We are now homeless and living with a relative in a 2 bedroom house.  There are 5 of us NOT including the relative.  We CANNOT live another 2 months like this let alone a year.  We need to know if we have any legal recourse to resolve this situation and if there is anyway to make HUD pay what they owe so that we can move into our house.  ALL of our money is tied up in this deal and if we walk away we lose EVERYTHING, but we can't wait a year to get in.  Someone please respond.

tiagross:

We moved out of the home we were renting so that we could move into our new home. 

Not a smooth move before you actually took possession of the new home.

tiagross:

We need to know if we have any legal recourse to resolve this situation and if there is anyway to make HUD pay what they owe so that we can move into our house.

I doubt it.

tiagross:

ALL of our money is tied up in this deal and if we walk away we lose EVERYTHING, but we can't wait a year to get in.  Someone please respond.

What does your contract say about your earnest money.  I fiind it it very hard to believe that you would loose your money if the seller cannot provide clear title.  Read your contract and if you don't understand it, take it to an attorney.

tiagross:

We are now homeless and living with a relative in a 2 bedroom house.  There are 5 of us NOT including the relative.  We CANNOT live another 2 months like this let alone a year.

None of this will matter to the seller or the HOA.  Maybe HUD would let you rent until they get this straight.  Ask HUD. 

"We CANNOT live another 2 months like this let alone a year."

First off, of course you could live that way ... forever.  I'm not saying you would or that you'd be comfy, but this sort of hyperbole is ... not productive.

It's also not clear why on Earth you'd even contemplate sitting around and waiting for a year or even months for this to be cleared up and for HUD to agree to proceed to closing (knowing it will get X less than it expected, because this lien must be satisfied before you and/or your lender will allow this sucker to close).

It's not your house until you go to closing, I'm afraid. 

"... if we walk away we lose EVERYTHING..."

This doesn't compute.  As for all of your money being tied up in an earnest money deposit, I hope not (always leave a cushion and a "stuff happens" fund -- if you don't have a substantial one of at least several months' worth of living expenses, you surely cannot afford to own a home, so this may be a blessing in disguise).  I can't fathom that you'd want to do anything other than give written notice that you're terminating the contract and that HUD needs to agree in writing to whomever's holding the deposit to release it back to you.

If HUD won't agree to have the agent release your deposit after you've given written notice to them that you are canceling the deal, then I'd seek local real estate counsel. 

By the way, I might seek a local real estate attorney anyway, to draft a nasty note to HUD.  I bet you anything they knew damn well that money was owed to the HOA.  Even if that's not so, they've presumably agreed in the contract to convey title to you free and clear of liens, and they cannot do that by the stated closing date.  Even if you unwisely signed a contract that did not mention "time is of the essence," the law will not force you to wait while they argue about not paying something when they agreed to close on X date and deliver clear title to the place.  Whether your contract mentions time being of the essence or not, I would not agree to any further extensions of the closing date.

Sorry, one more thing (for now).  In future, please investigate the property you intend to purchase more carefully.  You should not put down a contract on a place until you know what the HOA is about.  The contract won't require the seller to cough up relevant HOA documents and covenants and what not in a timely manner, and most folks don't think to include contingencies in a contract saying that the covenants and HOA-related declarations, rules, etc. need to be reviewed and to their satisfaction as a condition for closing.  If you'd done due diligence and looked into the issue of the HOA and how it operates before submitting the contract, I'm sure you would have heard about how much money is owed, among other things.

tiagross:

We need to know if we have any legal recourse to resolve this situation and if there is anyway to make HUD pay what they owe so that we can move into our house.

A great deal here depends on the exact terms of the contract as well as the applicable state law (and you didn't mention the state). It's critical to know what obligations HUD has under the contract and what your obligations are, too. If the contract is one drafted by HUD (as it very likely is since it is the seller), the contract terms are pretty much guaranteed to favor HUD. You should have had a lawyer look over the contract to make sure you'd not get stuck in a circumstance like this. If you didn't consult a lawyer then, you'll need to find a real estate lawyer now to have the contract reviewed to determine your options.

First thing I'd do here is contact your local congress respresentative and senator. HUD is a federal agency, and it will respond if your reps put some heat for answers as to why it won't pay and why it might hold up the sale for up to year battling over the HOA fees. Unless HUD has a good argument the tha HOA fees are not owed, the HUD senior officials will likely back down rather than tell Congress it is screwing your over in order to stall on a mistake it made.

Another possible option might be for you to pay the HOA fees and then sue HUD for reimbursement. You'd need in that case to make sure that the contract terms necessary to the lawsuit would survive in the deed you get to prevent losing out due to a doctrine called merger.

You might have the option to simply walk away from the contract and seek reimbursement from HUD of any deposit you made due to HUD's inabilty to close.

Unless your contract has a specific performance clause in it , which I doubt if HUD crafted the contract, you may lack legal leverage to force HUD to pay and to seek damages if they fail to close/cure on a timely basis.

Your street leverage may be limited to how you play your walk away cards.  Hopefully your contract has a time is of the essence clause or some sort of settle on or before date  and HUD is now in default.  Your realtor may be overfocused on the commission check--so be sure to triple check anything realtor may say

I appreciate your candid response.  I am in the process of finding a lawyer that can help us in this matter.  Many things I am unsure of when it comes to realty, but everyone we have spoken to has told us that HUD does not sell homes with liens on them.  The titles have to be clean a clear.  This situation has been complicated by other things that have happened to us around the same time.  This was merely the straw that broke the camel's back.  We are hoping to get this resolved before my husband has to go back overseas.  For future reference we will make sure that the ink is dry BEFORE making any plans.  It was a rookie mistake.

Thank you for the information.  I am frustrated and unsure about all our legal rights.  I have never dealt with HUD before and was woefully unprepared as to what to do about it.  This was suppose to be a very simple process and it just ballooned out of control.  I am in the process of finding a lawyer right now.

Thank you for your response(s).  I am taking all information I get and using it to fix this situation.  I should have done my research a little better.  I was under the impression that HUD could not even sell a house with a lien on it, so this was the last thing I was expecting.  Since posting I have made a few moves to get this ball rolling and I hope they pay off.  Next time I post I hope I have some good news.

Do NOT get so in love with this house that you front the money to buy it w lien , paying off lien, thinking you can recover it later from seller....most unlikley--and do not assume by waiting the seller will get it done either --take all promises with a big dose of salt  even if in writing....and if your attorney gives you an honest answere that it will be a long unlikley fight to get lien cleared first --kiss him or her for thier honesty and strongly consider a walk away. --you may or may not  reach desired end.... 

I refuse to pay anymore than I already have.  As much as I love this house I don't want to invest anymore money.

 I have contacted the local news in my area as well as my congressman.  I have to speak with his office again on Monday. We found out more info since my last post.  The HOA is the one at fault.  They went on the property and removed the garage door and replaced it citing rules and regulations about the property was in disrepair and they were in their rights to fix it.  (I have the proof that there was nothing wrong with the door).  The proceeded to bill HUD and put a lien for $16,000, and HUD refuse to pay it because they were not authorized to do any work on the property since it is bank owned.  There is another couple going through the same thing with this HOA.  I was told that it wasn't even legal to put a lien on a contracted house. It was placed on the house a week before my closing date.  That's why it didn't show up on the first title search. I am meeting with a lawyer later in the week to discuss my legal options. 

I'm not so sure that a HOA is prevented from putting a lien on something just because its under contract  or that it is prohibited from performing what it deems is necessary repairs just because  owner fails to give permission. HOA may have such powers.  I hope your source is reliable!

The HOA may be able to pack on interest plus attorney fess.

In some states an HOA lien has a super prioroty status--even ahead of 1st note holder  --I do NOT know the GA issues.  Your paid attorney should.