Homeowners Association Lien Law

As foreclosures, the credit crunch, and a general downturn in the overall economy, the financial fallout is beginning to impact the bottom lines of many homeowners associations.  Owners in distress have either stopped paying dues, or they have been foreclosed upon and the properties sit empty and delinquent.  Whatever the case, the coiffures of many associations are going to be a great deal thinner due the current state of the real estate market.  Therefore, the importance of what procedures a homeowners association (which differ from those of condominium associations) must now follow to foreclose a lien for unpaid assessments has grown, as well. 

A valid homeowners association (HOA) lien must contain the property’s legal description, the name of the record owner, name and address of the HOA, the amount due, and the due date.  Once filed of record, the lien secures not only all dues accrued to that point, but those that may accrue subsequent thereto.  Amounts owed also include costs, interests and attorney’s fees. 

What is very new to this process is the Notice of Contest of Lien which the property owner may file with the Clerk.  After recording the Notice, the Clerk must mail it to the HOA, and the HOA then has 90 days in which to either file an action to enforce the lien, or the lien automatically becomes void. 

It is important to note that the law creates a new limitation of liability for lenders.  Holders of a first mortgage who take title, either through foreclosure or the acceptance of a deed in lieu of foreclosure, are limited to either the prior 12 months’ delinquent assessments or 1% of the original mortgage amount, whichever is less. 

Perhaps the most interesting part of the new legislation is the creation of the “qualifying offer.”  Such an offer is defined as the property owner’s agreement to pay all sums due the HOA within a specified time.  Upon this agreement all lien foreclosure actions are tolled.  The statute adds that all sums must be paid no later than 60 days from when the offer is tendered, or the lien foreclosure action may then proceed. 

With the real estate market still in turmoil, some Realtors® are turning to HOA management as a source of income.  The Legislature has provided a much clearer and concise process by which HOAs can proceed to not only record their lien, but move to collect upon it.