Down in Las Vegas, an owner of real estate got a mortgage to buy the property. The owner failed to pay the monthly Homeowner Association dues. The HOA filed a lien on the property and later foreclosed.
A buyer bought the property at the foreclosure sale and then sued to get a good title to the real estate (clear the HOA lien).
The previous owner failed to pay IRS (U.S. Treasury) various income taxes. IRS had filed a lien on the real estate May 1, 2009. The HOA did not perfect its lien until sometime later than the IRS lien.
The issue was to determine which lien had priority. The court found the IRS lien was first so the buyer had to pay the unpaid taxes of the previous owner!
The “first in time, first in right” rule came into play.
It does not seem fair the buyer had to pay the purchase price of the property and also had to pay the previous owner’s unpaid federal income taxes. However, it does show the importance of what a title company does.
The title company tries to list all liens on the property. In this case, the matter was clouded a bit since the HOA dues were delinquent before May 1, 2009 (when the IRS lien was recorded). The court found the HOA lien was not of record until after the notice was sent to the previous owner, which was after the IRS lien was recorded in the county records.
The buyer could try to collect the income taxes and related expenses from the previous owner, but maybe the previous owner was unable to pay or had declared bankruptcy.
The lesson is to pay attention to the HOA notices and pay the dues. Letting HOA dues go delinquent and not paying timely is a mistake to avoid.
Buying real estate can be complicated. That is why a buyer should be “beware” and use qualified professionals to avoid problems.
Title companies certainly fill a need and perform an important service. But, even then, it may be an attorney will help determine which lien is first.
Did you hear “Never apologize for being sensitive or emotional. Let this be a sign that you have a big heart and are not afraid to let others see it. Showing your emotions is a sign of strength.” — Brigitte Nicole