Options for HOA Foreclosures
Home Owners Associations sometimes file foreclosure lawsuits over past due amounts. The video at the bottom discusses these kinds of lawsuits and ways to avoid losing your home to a HOA foreclosure.
HOA Foreclosure Misconceptions
A common misunderstanding is that the association cannot foreclose if you’re current with your mortgage payments but the association’s right or power to foreclose has nothing to do with whether you’re current on your mortgage payments.
Charges HOA can impose
State law and the HOA or COA’s administering archives, similar to the Declaration of Covenants, Conditions, and Restrictions (CC&Rs) and standing rules, will normally set out the sort of charges that might be remembered for the lien. In Ohio, a HOA or COA is allowed to include the following in its lien unless the governing documents provide otherwise:
- past-due evaluations
- late fees
- enforcement evaluations (like fines for violating the CC&Rs)
- collection costs
- attorneys’ expenses
- paralegal expenses
- interest. (Ohio Rev. Code Ann. § 5312.12(A), § 5311.18(A)(1))
Does Filing for Bankruptcy Eliminate HOA Dues and Liens?
If your HOA places a lien on your home and then initiates a foreclosure action in order to collect delinquent dues, filing for bankruptcy will not resolve the obligation. That’s because the lien against the house remains even if your personal obligation on the debt ends. However, you may be able to avoid some of the late fees and attorneys’ charges. Bankruptcy will also automatically stay the foreclosure action while your bankruptcy case is processed and a Chapter 13 will force the HOA to accept your late payments over time until your balance is paid.
While bankruptcy may provide short-term relief that will enable you to stay in your home, in all likelihood bankruptcy will not remove the lien on your property.
Impact of a Home Owner Association’s Lien
- A claim for money can negatively affects the marketability of a property
- Challenging to refinance
- Challenging to sell the property
Before purchasing a property, a potential seller will hire a title company or lawyer to conduct a title search, including an examination of county land records to ensure that the seller holds a valid title.
If a claim for money is in place, the examiner’s report will indicate that there is a “cloud on the title,” which means that the seller does not own the property free and clear which can be deal breaker.
Because the association’s lien “run with the land,” any handover of the property is made subject to the claim. The lien, therefore, increases the amount necessary to payoff all the obligations of the property. So, a purchaser will probably either insist that the seller pay off the claim before the transfer or require that it be paid from the proceeds of the sale.
A bank is also not likely to approve a loan or refinance if a lien is already on the property because the bank wants its claim to have the chief priority in case it has to foreclose. In this case, a bank will need to ensure the lien is paid as part of any financing. Even though first mortgage claims are omitted from most super lien statutes, if the homeowners’ association claim is recorded first, it can be superior to a later mortgage under the first-in-time principle.
If the bank has to foreclose, the proceeds are applied first to the entity with superior lien statutes, then the HOA claim for money, then to other liens. To avoid this, banks writing mortgage loans or refinancing existing mortgages will usually require that any claims for money be paid off at, or before, closing so that the new loan has the top lien position.
Contact HOA Foreclosure Attorney
If you are facing an HOA Foreclosure, you should consider consulting with a local lawyer to discuss all your legal options. The foreclosure lawyers of Doucet Gerling serve in all of Ohio, Columbus.