Live in a low-maintenance planned community? Then you probably pay assessments and fees every month to a homeowners association (HOA). HOAs rely on these monies collected to maintain the property. But what happens if you don't pay these fees and assessments on time? In this case, HOA foreclosure on your property is possible.
If you're asking, "can my HOA foreclose on my home?" and "can the HOA take my house?" the answer is yes. That's why it's important to learn the facts. Ask questions. And seek legal advice if you've been threatened with HOA foreclosure.
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Why HOA foreclosure happens
Cristina Pelaez, attorney with Rasco Klock Perez Nieto, says it's true: Your HOA may be permitted to foreclose on your home if you fail to pay what's owed.
"The HOA can file a claim of lien for the failure to pay fees or assessments," she says. Depending on your state's laws, "it may also file a claim for unpaid fines equal to $1,000 or more. This is due to your non-compliance with the HOA's governing documents."
Pelaez notes that a lien is a claim for money owed that is asserted against your property.
"Both state law and the HOA declaration provide the HOA with a lien against a non-paying owner's property for any unpaid fees. That means the HOA can assert its assessment claim against both the homeowner individually and against the property itself."
The HOA will record this claim on your property with the county land records. When this happens, the public at large is considered to have "constructive notice." This is notice that your property is subject to a debt and that any transfer or refinance of the property will be made subject to the claim for money.
"An HOA lien allows the HOA to sell your property to repay assessments. The lien also operates as a cloud on title," adds Pelaez. "This prevents you from selling or refinancing your home without satisfying the lien."
Related: Haven't Paid HOA; Can They Foreclose?
How HOA foreclosure works
If your HOA decides to proceed with foreclosure, it can do so either through judicial or non-judicial foreclosure.
"A judicial foreclosure requires a judge to hear facts," says Marc Markel, attorney with Roberts Markel Weinberg Butler Hailey. "The judge makes a determination that a lien exists and the amount owed is secured by the lien. If these conditions are found true, the judge can order that your property be sold to satisfy the obligation to the HOA."
Non-judicial foreclosure doesn't involve a court, Markel continues. "Here, the HOA's governing documents provide for a power of sale and permit the sale by a trustee named in those documents. This person can post and sell your property at a public sale or auction. First, they have to provide notice and meet all conditions precedent contained in the governing documents and comply with state laws."
Note that laws vary from state to state regarding foreclosures.
"In Texas, non-judicial foreclosures are only permitted for condos, for example," he says. "In Texas, HOAs are also not permitted to foreclose solely for fines."
Related: Home Loan After Foreclosure? Easier Than You Think
What you can do
Laura Endres is an attorney with Taylor, Eldridge & Endres, P.C. She says there's a surefire way to prevent foreclosure.
"Pay your monthly assessments and any other charges on time. If you fall behind, try to set up a payment plan with the HOA board," says Endres. "Do not ignore notices from your HOA. It's always best to communicate and find a solution if you're unable to pay. Plus, resolving the situation sooner versus later will save you money."
Got a beef with your HOA? "If so, file your complaint in writing with the board -- but do not stop paying your assessments," Endres recommends.
Also, "consider running for a spot on the HOA board. Then, try making the changes you desire," suggests Markel.
If a lien is filed against you, review it carefully. Consult a lawyer for legal advice.
"Say you believe the lien to be erroneous. If so, you can force the HOA to enforce a recorded claim of lien by recording a 'Notice of Content of Lien.' The HOA then has 90 days after being served with this notice to file an action to enforce the lien. If the action is not filed within 90 days, the HOA lien is void," Pelaez explains.
Other options
Note that, at any time before the entry of a foreclosure judgment, you have an opportunity to prevent HOA foreclosure.
"You may serve and file with the court a qualifying offer that the HOA can consider," says Pelaez. "This is a promise to pay all amounts secured by the lien -- plus accrued amounts while the offer is pending."
A qualifying offer is typically allowed so long as:
- Your home isn't the subject of a mortgage foreclosure or a notice of tax certificate sale
- You are not in bankruptcy proceedings
- The trial for the lien foreclosure auction is not set to begin within 30 days.
"Generally, HOAs are willing to accept a qualifying offer. That's because it means the debt will be paid off. Once you file a qualifying offer with the court, it postpones the foreclosure action for the period of time stated in the qualifying offer. That gives you time to submit payment," Pelaez notes.
If the HOA foreclosure is a done deal, you could try buying back your home.
"You may be able to purchase the property at or after the foreclosure auction. But there's a risk that you will have to pay even more than is owed to the HOA, including substantial legal fees. This is not a wise strategy," cautions Endres.
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