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Community Association foreclosures and squatters

Harmony Taylor

Despite what some may believe, association boards almost
never want to foreclose on a condo, townhome or single family home in their
community. When they do go through the time and expense of foreclosing, and are
forced to purchase the property through foreclosure, it is incredibly
frustrating to go to change the locks on a home only to find it already
occupied by a stranger. It can appear that someone- not the former owner-
showed up in the dead of night, gained access through some means, and moved in-
even going so far as to fully furnish the home, hook up utilities, and in one
notable case, install a swing set.   These persons are squatters, and like spring
allergies or lice, may be difficult to eliminate.

Squatting is generally defined as what happens when someone
without legal ownership or rights unlawfully occupies a property, usually
residential.  Recently squatting was in
the news here in North Carolina when a couple in Davidson was charged with illegally
squatting in a multi-million dollar mansion owned by Davidson Mayor, Rusty
Knox. In that case law enforcement immediately removed the alleged squatters,
but this does not always occur. Sometimes the squatters will allege that they
have some ownership interest in the property that was not addressed in the
foreclosure process.  Or, they may
produce false deeds or conveyances of interest, or they may produce a lease
that they claim gives them some right to remain in the home. In my experience,
if squatters can produce documentation like this law enforcement will be
reluctant to haul them out, and may decline to do more than shake their heads
sympathetically and recommend that the association pursue help through the
civil courts.

If an association does have to pursue civil action, it
should take a deep breath and proceed carefully. For alleged leases, the law
does provide some protection to those claiming to have a leasehold right in
property after foreclosure.  Prior to
December 2014, federal law afforded certain protections to tenants with
legitimate, bona fide leases after foreclosure, but that law has now expired.
North Carolina has its own version of the federal law, contained in N.C.G.S.
Chapter 45-21.33A, which requires a foreclosure sale purchaser who does not
intend to occupy the property as a primary residence to honor an existing lease
until the end of the remaining term or one year from the date the purchaser
acquires title, provided certain conditions are satisfied. The tenant cannot be
the prior owner, or the child, spouse or parent of the prior owner; there must
be a written lease that is not terminable at will with rent for fair market
value (no $1.00 per month); and there cannot be any imminently dangerous
conditions on the property.  If an
association forecloses, and finds out there is someone already living in the
property pursuant to a legitimate lease, that lease will likely need to be
honored for some period.

If the squatters claims some other interest in the property,
other than a lease, the association may simply need to file a civil action for
trespass and conversion of property, and ask a court to order their removal.
This action has to be filed in district or civil court, not small claims court,
and will be substantially more expensive than a simple summary ejectment
filing. You may need to hire a private investigator to determine who to even
sue, unless the squatters will do you the courtesy of letting you look at their
drivers’ license. You will need to serve the defendants and give them at least
30 days to respond before you can petition the court for possession. Depending
on how or if the squatters appear in the civil action, a final order may take
3-6 months or longer to obtain.

What, if anything, can you do to prevent squatting in
properties post-foreclosure? There is no silver bullet, but at a minimum the association
should monitor whether anyone is living in a property during the foreclosure
process, move immediately to change the locks and gain possession after
foreclosure, and take immediate action if someone is found to be squatting. Time
is not on your side in this process, and the faster you take action, the more
likely that the squatter will be moved on to different and, hopefully, less
green pastures.

For assistance with
squatter issues or any other community association related matter, contact one
of our community association attorneys in our Charlotte, Greensboro, Triangle
or Coastal offices.

Author: Harmony Taylor
Articles have been Reprinted with permission from Black, Slaughter, Black.

* These articles and related content on this website are provided without warranty of any kind and in no way constitute or provide legal advice. You are advised to contact an attorney specializing in Association Management for legal advice related to your specific issue and community. Some articles are provided by thrid parties and online services. Display of these articles does in no way endorse the products or services of Community Association Management by the author(s).