QUESTION
What recourse does an HOA have to get unpaid assessments? How?
Asked on Sep 09th, 2015 on Landlord and Tenant Law - California
More details to this question:
Our HOA CC&R states that: "The annual and special assessments, together with interest, costs and reasonable attorneys' fees, shall be a charge on the land and shall be a continuing lien upon the Lot against which each such assessment is made, the lien to be effective upon recordation of a Notice of Delinquent Assessment. Each such assessment, together with interest, costs and reasonable attorneys' fees, shall also be the personal obligation of the person who was the Owner of such Lot at the time when the assessment fell due. The personal obligation for the delinquent assessments shall not pass to an Owner's Successors in title, unless expressly assumed by them." As an HOA board member I am unclear as to the following: I read this as stating that the unpaid assessments are a personal obligation of the Owner and cannot be passed to the Owner's successor, yet it has been my understanding that HOA dues are attached to the property and indeed the CC&R statement above states that the assessments etc. "shall be a charge on the land and shall be a continuing lien upon the Lot". So, do we as an HOA have to go after previous owners who did not pay their assessments? Can their unpaid assessments be wiped out by bankruptcy or not? How can we protect the HOA against such Owners? It seems that the CC&Rs should provide all the needed protection. If we record the Notice of Delinquent Assessment, are we assured that we will be paid at escrow if the property is ever sold? What if we fail to record that Notice - do we have any recourse to get the unpaid assessments?
3 ANSWERS
This seems to be fairly standard HOA language. What it basically means is that once the HOA records the notice of lien, the condo unit is encumbered with the lien and before anyone tries to sell the unit they have to pay off the lien and the HOA costs in enforcing it. Most CC&R's also state that it is considered to be superior to all other liens, such as a mortgage, so that even if the mortgage amount exceeds the fair market value of the property, the HOA still gets first crack at the value of the unit. But unless the bank agrees to that, it is not retroactive if the loan was taken out before notice was filed,so you may need to change the CC&R's so that applies to all future loans. Since the fees are secured by the property, it is a secured debt so not dischargeable [not effected] in bankruptcy. The language means that when the unit is sold, the escrow company must pay the back assessments out of the purchase price and not merely pass the lien along to the new owner so that you can not collect it unless the new owner is willing to pay. You also probably have the right to foreclose on the unit put it up for sale and collect the amounts owed off the top of the sales price.
Answered on Sep 10th, 2015 at 5:15 AM
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You ask a number of questions, and provide part of the master deed. I would suggest you discuss this with the associations attorney, and be aware the annual and special assessments do indeed place a lien on the land, depending on what state you're in should be noticed with the registrar of deeds in order to perfect the land. Then in the event of a bankruptcy or sale the amount due should be paid. If you're to be on the homeowners association board they should provide for you some time with their attorney or the attorney of your choice to allow you to fully understand the various legal documents from which you derive your power, and the power that they give to the Association.
Answered on Sep 09th, 2015 at 3:15 PM
An HOA can attach the property and actually foreclose it, a rare power. Alternatively, the HOA can sue the homeowner and this is usually faster and more effective. Judgments can then be turned into Abstracts which bear interest or garnishments on wages. The personal debt can be erased by BK, and that is the weakness of this approach. If you would like more info please contact me directly.
Answered on Sep 09th, 2015 at 2:53 PM