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Fraudulent Lien Ends Badly for HOA Foreclosure Purchaser

The purchaser of residential property sold to satisfy a homeowners association (“HOA”) lien recently learned an expensive lesson about inflating redemption costs.  On November 29, 2017, San Antonio’s Fourth Court of Appeals ruled in favor of a homeowner who was awarded statutory and punitive damages by a Bexar County jury when the  purchaser exaggerated his price to redeem the foreclosed property.

The redemption price for a home foreclosed by an HOA is established by Section 209.011 of the Texas Property Code. That statute specifies charges that the homeowner must pay, and distinguishes between properties purchased by the property owners association and those posted by third parties. See TEX. PROP. CODE §§ 209.011(c), (e).

The appellate court’s opinion examined the proper calculation of charges permitted under Section 209.011, and analyzed Texas law as it relates to fraudulent liens or claims against real estate in violation of Section 12.002(a) of the Texas Civil Practice and Remedies Code.  The court upheld the jury’s findings that the foreclosure purchaser made a fraudulent lien or claim against the homeowner’s property, and affirmed an award of $20,000 in damages and $25,000 in exemplary damages (together with costs and attorneys’ fees).

The $20,000.00 damage award was based on operation of Section 12.002(b) of the Texas Civil Practice and Remedies Code, which sets forth the amount a plaintiff is entitled to recover in damages for a claim asserting a person made a fraudulent lien or claim. In relevant part, section 12.002(b)(1) provides a person who violates section 12.002(a) by making a fraudulent lien or claim is liable to each injured person for the greater of:  (A) $10,000; or (B) the actual damages caused by the violation.

Since the jury found that the homeowner/plaintiff’s actual financial damages were $1,359.22, the court of appeals determined that he was entitled to the statutory award of $10,000.00 x 2 (assessed against each the purchaser, individually, and his LLC).

Ultimately, the defendant/purchaser’s attempt to exact an additional $1359.22 from the redeeming homeowner cost him more than $50,000.00 plus his own court costs and attorneys’ fees.

The case, 402 Lone Star Property, LLC vs. Bradford, is a powerful reminder that placing a fraudulent lien or claim against real property in Texas can have painful consequences.