HOA boards have the explicit right to establish a lien against a property if the homeowner has not paid their fees. Information on what a lien is and how HOA boards use the lien can be found in another article found here. In this post, we will go over the procedure for establishing a lien by an HOA board.
When a homeowner has not paid their assessment fees or dues, the board should pursue payment. The entire community runs on those dues, and the board is the only enforcer of payment.
Several HOA boards around the country have reported that simple steps help with collections. Such as reminders, an official letter notifying the homeowner that their payment is late, and setting up a payment plan can resolve the situation. When those don’t work, HOA boards often take the next step of recording a lien against that homeowner’s property. Details on the process vary depending on your state’s laws, your bylaws, and CC&Rs. Having your attorney involved in the process can clarify these details. Still, below, we generally provide what steps are needed.
Before pursuing a lien, the board must send a pre-lien letter. Most boards send the letter through certified mail; some send it both certified and through regular mail. This letter must be mailed 30 days before filing a lien on the property. Failure to send a letter can make the lien null and void. Usually, a lien cannot be filed until at least 30 days after a has been sent by an HOA. Failure to wait long enough can also make the lien null and void. You can refile, but that cost time and attorney fees.
After the letter is sent, the board then votes on whether to file. This vote takes place in public and recorded meetings. During this meeting, the anonymity of a property’s homeowner must be protected. The homeowner cannot be identified by name, but the debt referred to by the account number or the assessor parcel identification number (APN).
After these two steps and the board votes to file the lien, homeowners do have the right to request materials from the board. They can ask for evidence of the notice, including proof that the certified pre-lien was sent and that the association followed the proper timeline and steps.
If requested by the homeowner, the board must also provide the meeting minutes where the vote on a lien occurred. There are often short timeframes to send these materials, so make sure you have the documents easily accessible.
Filing the Lien
After all the procedural requirements are met, the board can now have the HOA lawyer file the lien. Judgments and liens are a matter of public record, and HOAs typically record them through county register of deeds offices.
There is information that is required to be included in any assessment lien, which can be different under state laws. Generally, however, the lien must contain:
· An itemized statement of the amount owed. This same information was in your pre-lien letter, but it also must be in the lien itself;
· A legal description of the homeowner’s property. This allows interested parties to know which property has the lien, particularly if they are interested in purchasing;
· The name of the owner. While the owner’s name is kept out of the board’s public meeting to vote on the lien, the name must be included in the official lien filing.
· Proper board signature. The lien must be signed by the person designated in your CC&Rs who has been chosen for this purpose. If there is not a specific person already designated, the president of the association must sign the lien.
If your state is one that allows non-judicial foreclosure, then you could have additional requirements on what information is included in the lien.
After the Lien
One the lien has been recorded, a copy of it must be sent to all listed property owners by certified mail. Often it is required to be sent within a specific timeframe, so make sure you are aware of your requirements.
Now that the lien is filed, the association has the option to pursue further steps to force payment. These steps could vary from state to state, but include judicial foreclosure on the property, non-judicial foreclosure, or a small claims court. Each of these is covered in more detail in other articles. Non-judicial foreclosure is not an available choice in every state.
Some HOAs decide not to pursue any of those options, but to let the lien sit on the books until the debt is paid (as long as the lien doesn’t expire, which varies from state to state). Just having the lien in place prevents refinancing or sale of the property, so the homeowner has strong incentives to pay the debt. Your board should weigh the costs and time for each option.