New Jersey HOA and COA Foreclosures

If your home is part of a condominium owners' association (COA) or homeowners' association (HOA) in New Jersey and you fall behind in assessments:

• The COA or HOA can usually get a lien on your home if you become delinquent in paying the assessments.
• After you default on the assessments, the COA or HOA may foreclose.
• Lien priority determines what happens to other liens, like a mortgage, if a COA or HOA lien is foreclosed.

If the COA or HOA initiates a foreclosure, you might have a defense to the action, such as the association charged you too much, imposed unreasonable fees, or failed to follow state laws.

Or you might be able to negotiate a way to get caught up on the overdue amounts and save your home. For example, you might be able to pay off the entire delinquency, negotiate a reduced payoff amount, or enter into a repayment plan.

How COA or HOA Assessments Generally Work

When you buy a single-family home, townhome, or condominium in a planned community with covenants, you'll most likely pay fees and assessments, often collectively called "assessments" to a COA or HOA. If you fall behind in the assessments, the association will likely initially try to collect the debt using traditional methods. For instance, the association will probably call you and send letters.

But if those tactics don't get you to pay up, the association might try other ways to collect from you. The association could take away your privileges to use the common facilities or file a lawsuit for a money judgment against you.

Based on the association's Declaration of Condominium or Declaration of Covenants, Conditions, and Restrictions (CC&Rs) and state law, most COAs and HOAs also have the power to get a lien on your property if you become delinquent in assessments. Once you fall behind in payments, a lien will usually automatically attach to your property. Sometimes, the association will record its lien with the county recorder to provide public notice that the lien exists, regardless of whether state law requires recording.

An assessments lien clouds the title to the property, hindering your ability to sell or refinance the home. In addition, the property can also be foreclosed to force a sale to a new owner—even if the property has a mortgage.

COA Liens in New Jersey

In New Jersey, a COA lien becomes effective once the association records a claim of lien in the county records. (N.J. Stat. Ann. § 46:8B-21(a)).

If you make a written request, the COA must provide a statement stating the amount of the unpaid assessments within ten days of receiving your request. (N.J. Stat. Ann. § 46:8B-21(d)).

HOA Liens in New Jersey

An HOA gets a lien on each unit for any unpaid assessment upon proper notice to the appropriate unit owner. The lien is effective after the HOA records a claim of lien in the county records. The claim of lien must state the unit's description, the record owner's name, the amount due, and the date when due. (N.J. Stat. Ann. § 45:22A-44.1(a)).

If you make a written request, the HOA must provide a statement stating the amount of the unpaid assessments within ten days of receiving your request. (N.J. Stat. Ann. § 45:22A-44.1(d)).

Charges a COA or HOA May Include in the Lien

State law and the COA or HOA's governing documents will usually set out the type of charges that may be included in the lien.

Charges a COA May Include in the Lien

A COA is permitted to include the following in its lien:

• past-due assessments
• late fees (though the association can't record a lien that consists solely of late fees)
• fines
• expenses
• reasonable attorneys' fees, and
• interest at a rate established by the association but no more than the legal rate. (N.J. Stat. Ann. § 46:8B-17, § 46:8B-21(a)).

Charges an HOA May Include in the Lien

An HOA may include the following:

• overdue assessments
• interest
• late fees (but an association can't record a lien in which the unpaid assessment consists solely of late fees)
• fines
• expenses, and
• reasonable attorney's fees. (N.J. Stat. Ann. § 45:22A-44.1(a)).

COA and HOA Lien Foreclosures in New Jersey

Once a COA or HOA has a lien, it may foreclose.

COA Foreclosures in New Jersey

In New Jersey, a COA may foreclose its lien in the same manner as a mortgage on real estate. (N.J. Stat. Ann. § 45:8B-21(f)). So, the COA has to file a lawsuit in court to foreclose.

HOA Foreclosures in New Jersey

HOAs, too, may foreclose a lien in the same manner as a mortgage on real estate. Your association's governing documents might also set out particular foreclosure requirements. (N.J. Stat. Ann. § 45:22A–44.1(f))

COA or HOA Liens and Your Mortgage

A common misconception is that the association can't foreclose if you're current with your mortgage payments. But an association's right to foreclose isn't dependent on whether you're paid up on your mortgage. Instead, lien priority determines what happens in a foreclosure.

What Is Lien Priority?

The priority of liens establishes who gets paid first following a foreclosure sale and often determines whether a lienholder will get paid at all. Liens generally follow the "first in time, first in right" rule, which says that whichever lien is recorded first in the land records has higher priority than later recorded liens. A first lien has a higher priority than other liens and gets the first crack at the foreclosure sale proceeds.

If any proceeds are left after the first lien is paid in full, the excess proceeds go to the second lienholder until that lien is paid off. And so on. A lien with a low priority might get nothing from a foreclosure sale.

But state law or an association's governing documents might adjust lien priority.

Priority of COA and HOA Liens in New Jersey

A COA' and HOAs lien is generally prior to all other liens, except for:

• liens for property taxes
• liens recorded before the HOA or COA lien is recorded, and
• mortgage liens. (N.J. Stat. Ann. § 46:8B-21(a),.§ 45:22A–44.1(a)).

Is New Jersey a Super Lien State?

Under certain circumstances, a lien for delinquent assessments has priority over previous liens. This type of lien is called a "super lien."

In New Jersey, six months' worth of delinquent assessments, not including late charges, penalties, interest, or collection fees or costs, get super-lien status. (N.J. Stat. Ann. § 46:8B-21, § 45:22A–44.1(b)).

Talk to a Lawyer If You're Facing a COA or HOA Foreclosure

If you're facing a COA or HOA foreclosure in New Jersey, consider consulting with a foreclosure attorney to learn more about how the law applies to your situation and to discuss all legal options available in your particular circumstances.