Recent surveys discovered that 73% of Homeowners associations planned to increase fees and assessments this year! On top of that, these fee increases averaged about 10% inflation in HOA fees. For those affected, sneaky fees and overlooked charges can develop into an eventual HOA foreclosure.
HOA liens and foreclosures are legal, last-resort measures that association management can use to protect the community's interest. Learn more about how they work and how to protect yourself from foreclosure in this brief guide.
Foreclosures are legal processes that must be set up correctly before being validly executed. HOA liens set the stage for foreclosures.
When a homeowner falls behind on their fees and assessments, the HOA can get a lien on their house. A lien is essentially a right to claim what is owed to a lender or creditor (the HOA) from any proceeds of the sale of the property. A lien's further-reaching effects can make getting equity loans and re-financing difficult.
In California, an HOA lien will automatically attach to a home after the owner is 15 days in arrears on assessments. However, the HOA can only officially record the lien after 30 days of giving proper notice of the delinquency. This notice must include an itemized list of charges and a foreclosure warning.
These grace periods allow homeowners to catch up on payments or negotiate a way forward.
The HOA uses foreclosure as the proverbial stick to motivate homeowners to pay off the lien. The HOA obtains the right to sell the house at auction in order to claim the debt recorded in the lien. These foreclosures can be done judicially or non-judicially in California.
In judicial proceedings, the homeowner can be protected from a mean HOA by the court. There are also rules and procedures HOAs must follow in non-judicial foreclosures that protect homeowners.
Firstly, an HOA can't foreclose for fees under $1,800, and the assessments must be more than a year in arrears. Secondly, the homeowner retains the right to buy back the property for 90 days if they can pay all outstanding assessments, legal fees, and interest.
Defences Against Foreclosure
The best way to stave off foreclosures is by responding promptly to the lien notice. It would also serve you well to move into an HOA area with generous CC&Rs. Association management often gives generous terms in order to avoid lowering property value.
However, there are still ways to defend against foreclosure once the process starts. Challenging the HOA's authority to foreclose, the accuracy of their accounting, or the fairness of the charges are all viable tactics.
Get Peace of Mind Today
The threat of an HOA foreclosure is a tool that HOAs use to enforce their liens. HOA liens come about when a resident falls behind on paying their fees and assessments. If the owed amount is big enough and has been owing for long enough, the HOA can have the house sold to recover its debt.
A homeowner can protect themselves from foreclosure in a number of ways. Here at PMI LA Pacific, we believe prevention is better than a cure. Contact us today to learn more about HOA property management, finding the right HOA community, and more.