Many people in Arizona live in planned communities or condominiums that are governed by a Declaration of Covenants, Conditions and Restrictions, commonly known as the “CC&Rs,” The CC&Rs are recorded with the applicable county recorder, and are often enforced by a Homeowners’ Association (HOA). Owners often pay dues and assessments for maintenance of common areas and facilities. If a homeowner is late, Arizona law gives the HOA a lien against the property. In some circumstances, the HOA also has the power to foreclose if the delinquent assessments are not paid.
How the HOA Gets a Property Lien
HOAs have automatic, statutory liens pursuant to A.R.S. §§ 33-1256(A) (condominiums) and 33-1807(A) (planned communities). They also have a lien under the CC&Rs. The HOA has a lien on a unit for any assessment levied against that unit at the time the assessment is due. This means the HOA gets a lien on the unit automatically; they do not have to record the lien with the county recorder’s office.
The assessments lien can include the following costs: the assessment, late payment fees related to the assessment, reasonable collection fees, and reasonable attorney fees. The lien cannot include fines that are unrelated to the late assessment. For example, if a homeowner receives a fine from the HOA for putting a basketball hoop on the driveway, in violation of the community restrictions, this fine will not become part of the assessment lien. The HOA has to give the homeowner a proper hearing and get a court judgment before recording a lien.
Can an HOA Lien Result in Foreclosure?
The HOA does have the right to foreclose on the unit in some situations. The homeowner must have been delinquent on the assessments for at least one year or the past due amount must be at least $1,200, whichever occurs first. However, foreclosures on assessment liens do not occur very often.
First, this type of foreclosure must be done judicially – i.e., by filing a lawsuit and obtaining a court order of foreclosure. A judicial foreclosure takes longer and is more expensive than a non-judicial foreclosure (often referred to as a trustee’s sale). If the homeowner stops paying both the mortgage and the assessments, the mortgage holder will foreclose before the HOA does.
Assessment payments will also typically be much smaller than a mortgage payment. A homeowner who is up to date on mortgage payments, but has not paid assessments, would usually prefer to pay off their assessment debt, rather than lose a home over $1,200 in assessments.
Chernoff Law handles real estate litigation matters throughout Arizona. Contact us by calling 480-719-7307 to discuss your real estate matters.