If you purchase a home located in an area governed by a homeowners' association, you are responsible for paying dues to the HOA in exchange for services. Services include the ability to use the area’s facilities, such as a swimming pool, golf course or private gym, and periodic property maintenance. You must abide by the association’s rules or risk facing fines. Your failure to pay your HOA dues or any fines that the association levies against you could result in the HOA placing a lien on your property.
HOAs Flex Lien Muscles
State laws differ regarding how a HOA must file a lien. Depending on your state laws, the HOA either fills out and files lien paperwork with the county clerk or land records office or must win a lawsuit against you before having legal grounds to file a property lien. Once the HOA files its claim, the lien attaches to your home’s title until cleared through payment or litigation.
Foreclosure and Lien Payoff Priority
If you do not pay your debt to the HOA, it can foreclose on its lien and seize your home. The HOA must pay any superior liens attached to the property, such as liens filed by other creditors first or creditors with legal priority. State statutes vary regarding an HOA lien's priority. In Colorado, for example, the only claims superior to HOA liens are a mortgage lender’s deed of trust and state tax liens. If a Colorado HOA files a lien, its lien takes precedence over liens other than a deed of trust or tax lien. It receives payoff after a foreclosure only by paying off these superior liens.
HOA Liens Hinder Your Home
Even if the HOA decides not to foreclose on your home, you will have to pay off the lien before you can refinance or sell the home. A buyer can purchase your house but must pay off the lien if you can't. A buyer's lender usually will not finance an HOA lien-encumbered home. A cash buyer may purchase your home without financing or a lender that requires lien payoff. Depending on the size of the lien, a cash buyer may be your best bet for eliminating a lien you can't afford to pay off.
Lien, Lien Go Away
Once you pay off the debt you owe to your HOA, the HOA voluntarily releases its lien. If the lien was filed in error and the HOA does not release it, you may be able to have the lien released by contesting its validity – or the validity of your debt to the HOA – in court. Once the HOA releases its lien, it sends you a certificate as proof that the lien has been removed.
- NOLO: Homeowners' Associations (HOAs) and CC&Rs: Know What You're Getting Into
- NOLO: Collect Your Court Judgment With a Real Estate Lien
- Lawyers.com: Title Restrictions on Your Home; 2011
- Internal Revenue Service. "Understanding a Federal Tax Lien." Accessed Sep. 18, 2020.
- Experian. "Tax Liens Are No Longer a Part of Credit Reports." Accessed Sept. 18, 2020.
- Experian. "What Affects Your Credit Scores?" Accessed Sep. 18, 2020.
- Federal Trade Commission. "Fair Credit Reporting Act 15 U.S.C § 1681," Page 22. Accessed Sep. 18, 2020.
Ciele Edwards holds a Bachelor of Arts in English and has been a consumer advocate and credit specialist for more than 10 years. She currently works in the real-estate industry as a consumer credit and debt specialist. Edwards has experience working with collections, liens, judgments, bankruptcies, loans and credit law.