If you live in a house, condo, or townhome that is part of a common interest community, you are responsible for paying dues and assessments to the homeowners’ association (HOA) or condominium association (COA). If you don’t pay, in most cases the HOA or COA can get a lien on your property that could lead to a foreclosure.
Read on to learn about the particular requirements for HOA and COA foreclosures in Arizona.
In Arizona, there are two separate sets of statutes that govern association liens. One covers HOAs in planned communities (Ariz. Rev. Stat. § 33-1801 et seq.) and the other covers COAs (Ariz. Rev. Stat. § 33-1201 et seq.). The two sets of laws are very similar.
In most cases, once you fall behind in payments, the HOA or COA can obtain a lien on your property. Almost all HOAs and COAs have the power to place a lien on the property if the homeowner becomes delinquent in paying the monthly dues and/or any special assessments (collectively referred to as “assessments”).
Once a homeowner becomes delinquent on the assessments, a lien will usually automatically attach to that homeowner's property. In Arizona, the lien attaches to the property at the time the assessment becomes due (Ariz. Rev. Stat. § 33-1807(A), § 33-1256(A)). The HOA or COA does not have to record the lien in the county records in order for it to be valid (Ariz. Rev. Stat. § 33-1807(E), § 33-1256(E)). (In some states, the association must record the lien.)
Arizona law limits the types of charges that the HOA or COA may include in the assessments lien (Ariz. Rev. Stat. § 33-1807(A), § 33-1256(A)).
If you default on dues or assessments, the HOA or COA can foreclose. A common misconception is that the association cannot foreclose if you are current with your mortgage payments. However, the association’s right to foreclose has nothing to do with whether you are current on your mortgage payments. (Learn more about HOA liens and foreclosure.)
In Arizona, the HOA or COA may foreclose on its lien in the same manner as a mortgage lender can foreclose on a mortgage (Ariz. Rev. Stat. § 33-1807(A), § 33-1256(A)). Since mortgages in Arizona must be foreclosed judicially, this means that the HOA or COA must file a lawsuit in court to foreclose its lien (Ariz. Rev. Stat. § 33-721).
This differs from most residential foreclosures in Arizona. Arizona home loans are usually secured by a deed of trust, rather than a mortgage, so residential foreclosures are typically nonjudicial (which means the foreclosure takes place without court supervision). (Learn more about the difference between mortgages and deeds of trust and foreclosure laws and procedures in Arizona.)
In addition, Arizona has laws that limit the HOA’s or COA’s ability to foreclosure in certain circumstances.
The HOA/COA cannot foreclose unless:
Fines, in contrast to assessments, are the penalties that an HOA or COA imposes if you violate the CC&R's or other governing documents. For example, letting your lawn become overgrown, leaving trash cans outside, and parking in forbidden areas can result in fines and associated fees.
The HOA or COA can get a lien for penalties, fines, and related fees after the entry of a judgment in a civil suit, but it cannot foreclose that lien (Ariz. Rev. Stat. § 33-1807(A), §33-1256(A)). Basically, Arizona law makes a distinction between assessments and fines, and allows foreclosure actions only based on liens for unpaid assessments and related charges, but not for fines.
An association’s lien is prior to all other liens, except for:
In order for the lien to remain valid, the HOA or COA must initiate an action to enforce the lien within three years from the date that the full amount of the assessments became due (Ariz. Rev. Stat. § 33-1807(F), § 33-1256(F)). This is called the statute of limitations.
If you are facing an HOA or COA foreclosure, you should consult with an attorney licensed in Arizona to discuss all legal options available in your particular circumstances. (See our HOA Foreclosure topic page for articles on HOAs, possible options to catch up if you are delinquent in payments, how bankruptcy can help discharge dues, HOA super liens, and more.)