Delaware HOA Foreclosures
If you default on HOA assessments on a Delaware condo, townhome, or other common interest home, the HOA can foreclose.
If you live in a common interest community (such as a house, condo, or townhome) in Delaware, you are most likely responsible for paying dues and assessments to the homeowners’ association (HOA). If you don’t pay, in most cases the HOA can get a lien on your property that could lead to a foreclosure.
Read on to learn about the particular requirements for HOA foreclosures in Delaware.
Delaware HOA Lien Laws
The Delaware Uniform Common Interest Ownership Act (Del. Code Ann. tit. 25 § 81-101 through § 81-421) governs common interest communities (including planned unit development communities, cooperates, and condominiums) created after September 30, 2009, as well as communities created prior to this date with respect to events and circumstances occurring after that date.
How HOA Liens Work
Almost all HOAs 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 Delaware, the recording of the instruments that create a common interest community, such as the Declaration of Covenants, Conditions, and Restrictions (often called CC&Rs or the declaration) constitutes record notice and perfection of the lien. No further recording of the claim of lien for assessments is required (Del. Code Ann. tit. 25 § 81-316(d)). (In some states, the association must record the lien.)
Charges the HOA May Include in the Lien
Delaware law sets out the types of charges that the HOA may include in the assessments lien (Del. Code Ann. tit. 25 § 81-316(a)). Unless the declaration provides otherwise, the association can include charges for:
- Assessments. Of course, the HOA can include amounts for unpaid assessments in the lien.
- Late charges. Charges for the late payment of assessments may be included in the assessments lien as well.
- Reasonable attorney's fees and costs. The HOA may also include reasonable attorney's fees and costs incurred in the total lien amount.
- Fines. The association may include reasonable fines for violations of the declaration, bylaws, and/or rules of the association. (Learn about the difference between association bylaws and CC&Rs.)
- Interest. Interest on unpaid assessments will accrue at the rate of the lesser of 18% per year or the highest rate permitted by law, unless the declaration provides for a different interest rate.
- Other charges. The association may also impose certain other charges, such as charges for the preparation and recordation of amendments to the declaration or statements of unpaid assessments.
HOA Lien Priority in Delaware
An HOA’s lien is prior to all other liens, except for:
- liens recorded before the declaration
- a first mortgage or second mortgage that was recorded before the date on which the assessment sought to be enforced became delinquent, and
- liens for real estate taxes (and other governmental charges) (Del. Code Ann. tit. 25 § 81-316(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?)
HOA Super Liens
Under certain circumstances, an HOA lien for delinquent assessments may have priority over a lender’s mortgage. This is called a super lien. In Delaware, six months worth of delinquent common expense assessments have super lien status over both a first and second mortgage so long as the lien is recorded (Del. Code Ann. tit. 25 § 81-316(b)). (Learn more in Nolo’s article Homeowners’ Association Super Liens.)
Statement of Assessments Due
The HOA must provide you with a statement of the assessments due within ten business days if you make a request in writing (Del. Code Ann. tit. 25 § 81-316(h)).
HOA Foreclosures in Delaware
If you default on the assessments, the HOA 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 Delaware, the HOA may foreclose on its lien in the same manner as a mortgage lender can foreclose on a mortgage (Del. Code Ann. tit. 25 § 81-316(j)(1)). Since mortgages in Delaware are foreclosed judicially, this means that the HOA will file a lawsuit in court to foreclose its lien. (Learn more about foreclosure laws and procedures in Delaware.)
HOA Foreclosure Limitations
Delaware law limits the HOA’s ability to foreclosure in certain circumstances.
Limitation Based on Amount and Length of Delinquency
The HOA cannot foreclose unless the owner:
- owes at least three months of common expense assessments, and
- the HOA board expressly votes to begin the foreclosure action (Del. Code Ann. tit. 25 § 81-316(m)(1)).
HOA Must Obtain Judgment First if Lien is for Fines Only
Fines, in contrast to assessments, are the penalties that an HOA 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.
In Delaware, a foreclosure action cannot be started if the only amounts due are for fines (and related sums) unless the HOA first obtains a judgment in a lawsuit against the owner (Del. Code Ann. tit. 25 § 81-316(m).
Statute of Limitations
In order for the lien to remain valid, the HOA must initiate an action to enforce the lien within three years from the date that the full amount of the assessments became due (Del. Code Ann. tit. 25 § 81-316(e)). This is called the statute of limitations.
What to Do if You Are Facing Foreclosure by an HOA
If you are facing an HOA foreclosure, you should consult with an attorney licensed in Delaware 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.)