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.
Arizona HOA and COA Lien Laws
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.
How HOA and COA Liens Work
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.)
Charges the HOA or COA May Include in 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)).
- Assessments. Of course, the HOA/COA can include amounts for unpaid assessments in the lien.
- Late payment fees. Fees for the late payment of assessments may be included in the assessments lien as well, but they cannot be the sole basis for the lien.
- Reasonable collection fees. The association may include the costs expended in attempting to collect the past-due assessments in its lien.
- Reasonable attorney fees and costs. The HOA/COA may also include reasonable attorney fees and costs incurred with respect to the assessments in the total lien amount.
- Penalties/Fines. The association may not include monetary penalties or other charges unless they are related to assessments in the assessment lien.
HOA and COA Foreclosures in Arizona
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.
Limitation Based on Length and Amount of Delinquency
The HOA/COA cannot foreclose unless:
- the owner has been delinquent in paying the amounts secured by the lien (excluding collection fees, attorney fees, charges for late payments, and costs incurred with respect to the assessments) for a period of one year, or
- the delinquent amount is $1,200 or more, whichever occurs first (Ariz. Rev. Stat. § 33-1807(A), § 33-1256(A)).
No Foreclosure for Penalties and Fees Only
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.
HOA and COA Lien Priority in Arizona
An association’s lien is prior to all other liens, except for:
- liens recorded before the declaration of CC&Rs
- liens for real estate taxes (and other governmental charges), and
- a first mortgage that was recorded prior to the lien arising (Ariz. Rev. Stat. § 33-1807(B), § 33-1256(B)). (Learn more about lien priority and what happens to a first mortgage in an association foreclosure in Nolo’s article What happens to my mortgages if the HOA forecloses on its lien?)
Statute of Limitations
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.
What to Do if You Are Facing Foreclosure by an HOA or COA
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.)