If a homeowner who is behind in their dues files bankruptcy and the property goes into foreclosure, will the HOA (Homeowners Association) be able to collect the assessments owed? It depends. If the HOA has properly recorded a lien against the owner's interest the HOA will be considered a secured creditor and will have a much better chance of collecting.
The HOA must have a written statement of the policy for collecting delinquent assessments which is distributed annually to owners (See Annual Disclosures). The lien can only apply to delinquent assessments and to late fees, costs of collection (including attorneys' fees), interest on delinquent assessments, and reimbursement assessments for damage done to the common area. The lien and foreclosure process cannot be used to collect fines for rules violations or other monetary penalties.
The decision to record a lien must be made by the board of directors in an open meeting and the vote to record a lien must be mentioned in the minutes of the meeting. The decision to record a lien cannot be delegated to the managing agent or property manager. At least 30 days before a lien is recorded the owner of the separate interest must be sent notification by certified mail. The notice must contain all of the items listed in California Civil Code Section 1367.1. Among other requirements, these items include an itemized statement of charges and the right to request a meeting with the board.
Having a collection policy in place and enforcing it systematically is important to protect the HOA. If it is determined that the HOA has recorded a lien in error, the HOA must promptly reverse all late charges and fees and release the lien. The HOA would also have to pay all costs relating to dispute resolution which might include attorneys' fees for the owner of interest.
If you are part of an HOA considering filing a lien, or a homeowner who believes a lien has been improperly recorded against their interest, it is important to understand your rights and responsibilities. Legal counsel can help. Call Link Schrader, Attorney (323) 822-9422 or by email link@link-schrader.com
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Dear Mr. Schrader,
We've stumbled upon your blog the night before going to court trial against our HOA. Your blog has been very insightful and we appreciate the quality of information that you provide! Through much research, we've discovered just how many of our rights have been grossly trumped by our HOA. With gratitude, Mr. & Mrs. Homeowner
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