In the event that you are considering purchasing a house that is part of a planned community with covenants, it is quite probable that you will have to pay fees and assessments to a homeowners’ organization (HOA). Homeowners may have a lien placed on their property if they become overdue in paying the fees imposed by their neighborhood association, which are mostly covered by the governing documents, state law, and the state’s covenants, conditions, and restrictions (CC&Rs).
Generally, the lien will attach to the property immediately after the due date for assessment charges. HOA liens are sometimes entered into county records for the sake of public notice, even though state law doesn’t mandate it. If the HOA imposes a lien, it may go on to seize the home and compel a sale to force a new owner.
What are HOA liens?
After a homeowner misses payments, a lien will almost always be imposed on the property. Lien attachment happens generally as of the day when the evaluations were due. To ensure that the public is aware of liens, HOA might record a lien at the county recorder’s office, even if it is not necessary.
Homeowners Association Liens
A homeowner who does not pay a HOA fee or assessment instantly attaches liens on their property. Recording the lien with the county records office is not always necessary, unless the HOA choose to do so. The homeowner must cover the missing payments or assessments and additionally pay any penalties, interest, and, in some cases, fines and legal expenses to lift the lien. In addition to creating the danger of foreclosure, a HOA lien can make it impossible for a homeowner to sell their property because of the debt’s impact on the homeowner’s title.
A CC&R is often written in such a way that the HOA has the power to foreclose on a lien, even if the property is also secured by a mortgage. However, it must be selected from one of two options: either judicial foreclosure or non-judicial foreclosure, as long as the CC&Rs and state law allow. In judicial foreclosure, one files a lawsuit and goes to court, while in non-judicial foreclosure, no such action is necessary.
Foreclosure proceedings on HOA mortgages
Unless it was recorded prior to the HOA lien being filed, a HOA lien will have precedence over all other liens on the property, including the original mortgage. However, if the HOA assumes ownership of the home, it will not be responsible for paying down the initial mortgage. The homeowner must continue pay the lender regardless of whether or not they refinance their mortgage.
If the homeowner is forced to sell their house due to the HOA foreclosure, they may be forced to discontinue making payments to the mortgage holder. Although the HOA may choose to make payments on the home foreclosure, they will likely not do so unless the mortgage holder is willing to wait for their funds. The HOA will be better off with a new owner who is obliged to pay fees and levies.
Any other lien junior to the HOA’s lien will be removed from the property and will not further encumber the title. Of course, if the homeowner signed any promissory notes, they will be responsible for paying off these obligations themselves. The owners of these liens could take legal action against them.
Post-Foreclosure Situations of HOAs
In some places, a homeowner can redeem their house after it has been foreclosed on. You may get your house back by paying down the HOA balance, as well as interest, fees, and penalties. After the foreclosure, if the HOA had to fix up your home, you may need to reimburse it for the repairs. A redeemable right may last only a few months and vary by state.
If you lose your HOA’s foreclosure, your credit score might be severely damaged. Your ability to secure a mortgage in the future and the interest rate you pay on your mortgage are at risk. You may also have to make a bigger down payment. You may have a less dramatic decrease in your credit score if you had already experienced a decline in your credit rating. Even if your HOA does not resort to foreclosure, skipping a payment might cause your credit score to deteriorate if the HOA reports it to credit bureaus.
Summary
Homeowners may have a lien placed on their property if they become overdue in paying the fees imposed by their neighborhood association. Lien attachment happens generally as of the day when the evaluations were due. Recording the lien with the county records office is not always necessary, unless the HOA choose to do so. If you lose your HOA’s foreclosure, your credit score might be severely damaged. A homeowner can redeem their house after it has been foreclosed on.