Ask Brian is a weekly column by Real Estate Expert Brian Kline. If you have questions on real estate investing, DIY, home buying/selling, or other housing inquiries please email your questions to [email protected].
Question from Carter in OK: Hi Brian, I bought my home 14 months ago. This is the first home that I’ve owned a home that is part of a Home Owner’s Association. Last week, I received a certified letter from the HOA saying that they are beginning foreclosure against a lien they have placed on my home. They say that I haven’t made any of my “assessment” payments since I moved in. I’m totally confused. I thought those payments were part of my mortgage payment the same way my homeowner’s insurance was with the house that I owned before this one. How do I fight my homeowner's association? They’re telling me my account is with the lawyers. I didn’t get a bill and suddenly, there’s a lawyer's letter informing me that my HOA is foreclosing on the lien to my house for nonpayment of association fees.
Answer: Hello Carter. Without knowing all of the details, it does sound like you have a big problem on your hands that you need to start resolving immediately. The fact is that in most states, HOAs have almost as much authority to foreclose on your house as your mortgage company does. The number one reason for foreclosures is the non-payment of HOA fees. If you really don’t understand what is going on, you should probably hire an attorney to help you understand and to help you figure out what your options are and what your next step should be.
I can understand how you might have thought it was part of your mortgage payment in the beginning but there had to have been a lot of red flags telling you otherwise – beginning with when you bought the house. HOA laws vary significantly from state to state, and I don’t even begin to understand all of the variations. However, some general laws apply in almost every situation. First of all, there should have been a pile of paperwork related to the HOA that was part of the closing paperwork that you signed at the closing table. I’m guessing you didn’t read it or didn’t understand it. That’s unfortunate. When I’ve written about HOAs in the past, I’ve always strongly suggested home buyers understand what is going on with the HOA even before making a purchase offer. This includes reading the board of directors' meeting minutes for the past year, going over the financial condition of the HOA, and reading the Covenants, Conditions, and Restrictions (CC&Rs).
Carter, back to your specific problem. The short answer is that “yes” you have a big problem because almost every HOA has the authority to foreclose on a home owner for failing to pay dues or fees. Depending on state laws and the CC&Rs, you should have been sent multiple notices by registered mail telling you that you were past due. Eventually, you should have received notice that the HOA was beginning the process to place a lien on your home. It definitely should have opened your eyes when you received notice that a lien had been placed on your home. Maybe that is the step that you are currently at, and it did catch your attention. A letter from the HOA (or their attorney) might have included a notice of intent to foreclosure and that is the next and final step. This is what you need an attorney to help you understand — what step in the process you are at and what you need to do to turn things around. You can be sure that you’ll have to pay all of the past due fees and probably a bunch of late payments and fines along with it.
You’ll want a real estate attorney to explain it in detail and specific to your situation but generally how the HOA foreclosure process works is:
Once an HOA board decides to foreclose, it must satisfy some statutory requirements, such as:
After that, the attorney should notify the clerk of the court by filing a Notice of Foreclosure Hearing. As the homeowner, you should be served this notice via certified mail or by the sheriff. If certified notice can’t be accomplished, the sheriff might “post” the notice on the property.
The notice lets the owner know that they must attend a hearing before the Clerk of Court, a process known as non-judicial foreclosure. In this type of foreclosure, the HOA does not have a high burden of proof. Generally, all the HOA must prove is that:
Most courts will grant at least one postponement to allow the home owner a short time to attempt to pay the debt. The HOA should accept payment arrangements if they are reasonable. The court can then postpone the foreclosure action or dismiss it completely with the agreement that the HOA will re-file the lien if the owner fails to follow the payment plan.
If no agreement is reached between the HOA and home owner, and the HOA meets the statutory requirements, the court will then enter an order to permit the foreclosure to be completed. The sale can be completed in as little as 25 or 30 days.
Carter, as you can see, this is a serious legal matter that you need to immediately begin dealing with.
What can you add about an HOA foreclosing on a home owner? Please leave a comment.Our weekly Ask Brian column welcomes questions from readers of all experience levels with residential real estate. Please email your questions or inquiries to [email protected].