In a rare case, the Masterson Station Neighborhood Association won a court judgment this year to foreclose on a Lexington woman's home.
The Urban County Council decided on Tuesday to review the situation in which Ingrid Boak's home was sold at a master commissioner's sale because she did not pay a mandatory $48 annual fee and accumulated late fees for at least six years.
Council member Shevawn Akers said she wants the council planning and public works committee to review the matter because there were apparently no attempts to reach Boak in person.
Boak acknowledged that she did not open letters or respond to the attempts to reach her by mail, but said no one served her with a notice in person or received a signature from her acknowledging that she knew her home would be sold.
"I want to determine if we have any jurisdiction locally over" homeowner associations, said Akers, who lives in Masterson Station. Akers said she thought the sale of the home was not an appropriate consequence for nonpayment of fees.
Akers said changes regarding homeowners associations might have to be made through the General Assembly.
Boak's situation, reported last month by WLEX-TV, is rare, attorneys involved in the case say, but the homeowners association is within its rights.
Homeowners associations are governed by state real-estate property law and can be a plaintiff in a foreclosure action just as a bank or a mortgage company can, said James Frazier, master commissioner of the Fayette Circuit Court.
The foreclosure rights come from the governing documents of the association, said the Masterson Station association's attorney Nathan Billings.
By acceptance of a deed for property in the association, every owner in the association agrees to pay the association's annual dues and assessments and interest, late fees, attorney fees and filing fees if the dues are not paid on time, according to a court document.
"If somebody didn't pay their mortgage what's going to happen? They lose their house to the same process that the association uses," Billings said. "If they don't pay their tax bill what happens? It's the same process. It's the same principle."
Membership in some neighborhood associations is voluntary. But Masterson Station Neighborhood Association Inc. is described in court records as a nonprofit common property homeowners association. Membership is mandatory.
Some homeowners association fees are due monthly; others, annually, and the costs vary widely, Billings said. "It totally depends on the association, the amenities, the common areas, the common property, " he said.
Boak said she paid $125,000 cash in 2007 for her home on Winding Oak Trail and her taxes were paid on time. No one ever told her when she bought the house that paying the $48 annual dues was mandatory, she said.
Boak, 75, a horse trainer who lives out of town much of the time, said she never opened her mail from the neighborhood association.
Billings said Boak did not respond to 14 notices or letters before the lawsuit was filed. She also didn't respond to at least 10 notices afterward, he said. In total, Billings said, Boak was sent nearly 30 notices before her property was foreclosed on in Fayette Circuit Court and sold by the master commissioner.
Boak said she thought the letters from the neighborhood association were an attempt to encourage her to join on a voluntary basis. She said she was not aware that attorneys appointed by the court sent her notices to warn her that the association had filed a notice of lien on the property for $884 in unpaid dues and assessments in the county clerk's office in April 2012. And Boak said that because she was working out of town she did not respond to certified mail notices. She said she never saw correspondence that the case had gone to court or that the court had approved that the home be sold at a master commissioner's sale to satisfy the judgment against her.
Boak said the first time she realized that her home had been sold was when, while she was out of town, a neighbor saw a handwritten note posted on her door from the new owner who bought the home for $93,500. Boak's home was appraised at $120,000, according to court records. She said she is renting from the current owner.
Boak — who, according to court documents, received $87,996 from the sale of her home — said she did not appeal the sale because she did not want to pay steep attorney costs. Boak said she appeared in court once to discuss distribution of her money from the sale of the home. Billings, the attorney, said the neighborhood association did not know that someone lived at Boak's house because she never responded to multiple notices.
Boak said the neighborhood association did not try to determine whether the home was vacant, because if someone had contacted her neighbors, the officials would have realized someone was living there.
No utilities were cut off, she said. The grass was cut and the house was taken care of. An umbrella stand on the front porch contained an umbrella.
"The flowers were there," Boak said. "A car was sitting in the driveway all the time. The house definitely did not look deserted."
"My neighbors would have been glad" to have given association officials her phone number or contacted her about the foreclosure while she was out of town, she said.
Billings said his law firm gives homeowners every opportunity to set up a payment plan:
First, his office files a notice of lien in the clerk's office and sends a copy to the homeowner by regular and certified mail. A payment plan is offered. The homeowner receives at least three demand letters by regular and certified mail before court action is pursued.
Neighborhood associations typically don't take court action until there are "multiple, multiple missed periods of payments," Billings said.
He said legal action didn't begin against Boak until the sixth year that she missed payments without responding.
If Boak had responded, Billings said the homeowners association would have halted the foreclosure until officials could talk to her.
The master commissioner website shows that the Masterson Station Neighborhood Association was a plaintiff in at least one other foreclosure case in 2013. Billings said he did not have specific details, but action was taken to set that sale aside.
Frazier, the master commissioner, said it is unusual for a homeowners association to be the sole plaintiff in a foreclosure case because most of the time when people aren't paying their homeowner fees they aren't paying their mortgage, either, and a bank or mortgage company is an additional plaintiff. In this case, Frazier said, Boak did not have a mortgage.
Frazier, who is also an attorney, said the actions of the homeowners association were legal. Frazier said he is a neutral party in the case, but he said he thought that any changes to the process would have to be initiated in the General Assembly and not the Urban County Council.
Billings, who said he represents about 80 homeowner associations in Kentucky, acknowledges that it is a rarity for homeowners associations to be a plaintiff in foreclosures when there is no mortgage on the property. But he said homeowners associations are commonly named in foreclosure actions along with banks because they have liens for unpaid dues on lots.
As for Boak's case, Billings said the feedback he has received over the past month has been supportive.
He said people have paid their dues for other neighborhood associations as a result of learning about Boak's case.
"People realize the seriousness of not paying their dues, and a story like this helps elevate the importance of their obligation," Billings said.
Still, Councilman Bill Farmer, who heads the Planning and Public Works Committee, which will review Boak's case, said he hopes, at a minimum, the council can facilitate better communication between homeowners associations and residents who have unpaid fees.
"That just seems awfully harsh for someone to lose their home over fees in the neighborhood," he said.