If you live in a home, condo, apartment, or dwelling that is part of a Home Owners Association, you already know that you are required to pay HOA dues each month, as well as certain special assessments while you reside in the association. While they are necessary to proper maintenance of the association’s collective properties, they can be a costly financial obligation. Many HOA boards and members wonder what will happen should homeowners default on their monthly fees and find themselves in trouble with their association.
To help you out with that question, we’ve put together a brief overview:
Liens
Most HOAs have the ability to place a lien on any property if the homeowner fails to pay the monthly fees or assessments. The lien will generally attach to the property as of the date that the fees became due, and in some states, the HOA will also put the lien on the public county record.
Once the lien is in place, and depending on the specific terms stated in the CC&Rs, the homeowner may have liability for any unpaid assessments, late fees or fines, attorneys’ fees, and interest. The lien will also be reflected on the property title and can make refinancing or selling difficult.
Foreclosure
Even if the property owner is current with their monthly mortgage payments, most HOAs can choose to foreclose on a lien to satisfy the debt that occurred from defaulting on fees and assessment payments. Depending on the CC&R terms and state law, the HOA can file for either judicial foreclosure, by filing a lawsuit against the homeowner, or nonjudicial foreclosure, by following specified procedures dictated by state law but without the need to go through a state court to sell the property.
Statute of Limitations
Each state will have its own statute of limitations with regards to placing a lien on a delinquent property, and will determine the validity of the lien. For example, Arizona law requires that the HOA must initiate action to enforce a lien within three years of when the fees or assessments were due. If this time has passed, the lien is no longer valid by law.
Redemption
Some states provide homeowners with a circumstantial redemption period following a foreclosure. Texas law states that in the event of an HOA foreclosure, the homeowner may reacquire the home within 180 days of receiving a post-foreclosure notice of redemption rights. The homeowner must repay all that is due to the association at the time of the foreclosure sale, plus any interest and attorney’s fees. They are also responsible for payment of any assessments imposed following the sale, and any incurred maintenance or leasing costs.
Actions to Take
Should you find yourself with a lien on your property or facing foreclosure by your HOA, you should familiarize yourself with your CC&R terms as well as state laws, including the statute of limitations. Because many state laws are complicated and complex, you may need to consult with an attorney to determine your options and ensure the best defense against losing your property.
