Foreclosures and the HOA

Written by Posted On Wednesday, 09 July 2014 17:30

Norm - Today's post is a guest article by Emily Dresser of the web site


What happens when a financial institution or other group buys a condo development out of foreclosure? Do they have to follow the original deed that the developer had or the agreements the original developer had with the local government as a site condominium development? Is this situation similar to a zombie title foreclosure?


Currently, zombie foreclosures represent every one in five foreclosures nationwide, according to housing data firm RealtyTrac. It’s not just individual homeowners losing their homes to foreclosure; some condominium developers have lost developments to foreclosure after filing for bankruptcy.

A foreclosed or abandoned site condo complex could quickly turn into a modern ghost town and can create numerous legal issues for homeowners who purchased units in the development early on and for a homeowners’ association. Owners who moved into the development before it was completed are left wondering if the development will be finished, if the proposed amenities will be built, and if necessary infrastructures like roads will be finished. Who is responsible to complete the development? How will warranty claims be addressed? Can they stay in their homes? Will the new owner follow the covenants in the master deed?


A number of things could happen in a situation like this, and any owner is advised to seek legal counsel. Some states have laws addressing the bankruptcy of condominium developers and what happens to the HOA if the developer declares bankruptcy.


The new owner could terminate the Homeowner’s Association, or could buy enough units to gain control of the association. Many condo owners depend on their HOA for routine maintenance, landscaping, and other amenities. If the required number of units hasn’t sold for the developer to hand over control of the HOA after they have filed for bankruptcy, the homeowners are often left to defer to state law and the Uniform Common Interest Ownership Act (if the state is a UCIOA state).


The homeowners who are left behind after the foreclosure sale could possibly seek judicial declaration stating that the developers’ bankruptcy is a de facto turnover of the association to the homeowners. This allows the owners to have control of the HOA, assuming enough of the units are occupied.

Emily Dressler writes for, a leading publisher of state- and county-specific real estate deeds. For a more in-depth look at zombie titles and foreclosures visit,, and to purchase a state-specific real estate deed, visit    



(Norm – We certainly experienced what Emily wrote about locally, with several site condo developments abandoned by the original developers, many of whom when out of business or bankrupt and sold off the remaining lots or lost them to the banks. Fortunately, many developers locally just shut things down and rode out the recession and have now resumed building. In the interim early buyers were left with a feeling of abandonment and confusion over what their rights might be and what obligations they might have inadvertently inherited.)


Rate this item
(0 votes)
Norm Werner

Norm Werner is a Realtor at the Milford office of Real Estate One serving the southeastern Michigan area of Oakland and Livingston Counties. Norm specializes in residential real estate. Norm lives and works in Milford Michigan and is married to Carolyn Werner. Norm and Carolyn live in a historic home just three blocks from downtown Milford, with their two dogs - Sadie and Skippy. Norm specializes in the historic homes of Milford and the surrounding area and is on the Board of Directors of the Milford Historical Society. Norm especially enjoys working with first time buyers and those at the other end of the real estate spectrum who are downsizing into their retirement home. 

In addition to his web site, Norm also owns and m,aintains web site, the web site. He is also the webmaster for and the web site and the MilfordCar web site, as well as his church web site - In addition to blogging about real eastate, Norm has a personal blog - - on which he shares inspirational messages and the occasions personal observation about life.

Agent Resource

Limited time offer - 50% off - click here

Realty Times

From buying and selling advice for consumers to money-making tips for Agents, our content, updated daily, has made Realty Times® a must-read, and see, for anyone involved in Real Estate.