Can the HOA foreclose on its lien if I have a first and second mortgage?
Even if you have other mortgages, your homeowners association (HOA) can foreclose on your home if you get behind in dues.
I live in a townhome. My homeowners association (HOA) recorded a lien on my property because I got behind in dues and assessments. I have a first and second mortgage on my home. Can the HOA foreclose on the lien even though I have the other mortgages?
Yes, it can. If an HOA has a lien on a homeowner’s property, it may foreclose on that lien even if there are outstanding mortgages, so long as the Covenants, Conditions and Restrictions (CC&Rs) permit it, which they usually do. (Learn more in Nolo’s article What are Covenants, Conditions and Restrictions (CC&Rs) in HOAs?)
HOA Lien Foreclosures
The HOA may foreclose judicially or nonjudicially, depending on the law in your state. If the foreclosure is judicial, the HOA must file a lawsuit against you and obtain a judgment from the court granting permission to sell your home to satisfy the HOA’s lien. To nonjudicially foreclose, the lender does not have to go through the court to foreclose. Instead, it must follow specific procedures as laid out by state law, as well as the CC&Rs. (To learn more about the difference between judicial and nonjudicial foreclosure, and the procedures for each, see our Judicial v. Nonjudicial Foreclosure topic area.)
What Happens to First and Second Mortgages if the HOA Forecloses
HOA liens are often recorded after a first mortgage. This makes the HOA lien “junior” in priority to the mortgage. (Learn more about lien priority in Nolo’s article What Happens to Liens and Second Mortgages in Foreclosure?) If this is the case, the first mortgage lien remains on the property following the HOA foreclosure. The HOA, or any other purchaser at the foreclosure sale, takes the property subject to that lien. (Learn more in Nolo's article HOA Liens & Foreclosures: An Overview.)
Even if the HOA lien is recorded prior to the first mortgage, most CC&Rs contain a provision that makes the HOA lien subordinate (junior) to any first mortgage. (This makes it easier for homeowners who live in HOA communities to obtain financing since the lender will typically require its mortgage to be in the senior lien position, otherwise it wouldn’t make the loan.)
A second mortgage, if recorded after the HOA lien, would be wiped out by the foreclosure of a senior HOA lien. If the second mortgage was recorded prior to the HOA lien, it (like a first mortgage) would remain on the property following the HOA foreclosure.
HOA Super Liens
Certain states (around 20) have laws that give HOA liens what is called “super lien” status under particular circumstances. Colorado law gives HOAs a super lien with priority over a first deed of trust (mortgage) for six months worth of delinquent assessments. Nine months of assessments are afforded super lien status in Nevada. (Learn more in Nolo’s article Homeowners Association Super Liens.)
If the HOA forecloses a super lien, it can potenitally, in some cases, wipe out the first mortgage along with any other junior liens on the property. In Nevada, for example, the state supreme court has ruled that an HOA super lien can extinguish a first deed of trust in a foreclosure. For this reason, if an HOA begins a foreclosure in a super-lien state, the first-mortgage lender will often pay off the super-lien amount to maintain its first-lien position and stop the foreclosure.
State Law May Restrict the HOA Foreclosure
State laws often place particular due process requirements on HOAs regarding how and when they can foreclose their lien. For example, in California, the HOA must wait 30 days after it has sent a required notice to a homeowner regarding any delinquent assessments before it can even record the lien. The notice must provide information about the lien, including the amount due and how it was calculated, as well as offer various options to try to resolve the issue, such as dispute resolution (Cal. Civ. Code § 1367.1(a)). Additionally, before the HOA can initiate foreclosure proceedings in California, the delinquent assessments must total at least $1,800 or the assessments must be more than 12 months delinquent (Cal. Civ. Code §1367.4(c)).
How to Learn More
To find out about the laws in your state that govern HOA liens and foreclosures, see Nolo’s Laws and Legal Research section or speak with a local real estate or foreclosure attorney.