North Carolina HOA and COA Foreclosures
If you default on HOA or COA dues and assessments in North Carolina, the homeowners association can foreclosure on your condo, townhome, or house.
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If you live in a private community setting (whether it is a condominium, townhouse, or single-family home) in North Carolina, usually you must pay dues and assessments to a homeowners’ association (HOA) or a condominium association (COA). If you fall behind in payments, in most cases the HOA or COA can get a lien on your home that could lead to a foreclosure.
Read on to learn about the particular requirements for HOA and COA foreclosures in North Carolina.
North Carolina HOA and COA Lien Laws
The North Carolina Planned Community Act (N.C. Gen. Stat. §§ 47F-1-101 through 47F-3-122) governs HOA activities, while the North Carolina Condominium Act (N.C. Gen. Stat. §§ 47C-1-101 through 47C-4-120) applies to condominiums created after October 1, 1986. (Except for § 47C-3-115, the provisions of the Condominium Act discussed in this article also apply to condos created before this date.) The two sets of laws are very similar.
How HOA and COA Liens Work
Most HOAs and COAs have the power to place a lien on your home if you become delinquent in paying the monthly dues and/or any special assessments (collectively referred to as assessments).
In North Carolina, an HOA or COA is entitled to a lien for unpaid assessments and related charges once the amount due is 30 days late. The lien becomes effective when the HOA or COA files a claim of lien with the clerk of the superior court in the county where the property is located (N.C. Gen. Stat. § 47F-3-116(a), § 47C-3-116(a)).
Charges the HOA or COA May Include in the Lien
State law and the HOA or COA’s governing documents, such as the Declaration of Covenants, Conditions, and Restrictions (CC&Rs) and bylaws, will often set out the type of charges that may be included in the lien. In North Carolina, an HOA or COA is permitted to include the following in its lien (unless the governing documents provide otherwise):
- past-due assessments
- late charges (not to exceed the greater of $20 per month or 10% of any unpaid assessment) (N.C. Gen. Stat. § 47F-3-102(11), § 47C-3-102 (11))
- fines for violations of the CC&Rs
- interest on past-due common expense assessments (not to exceed 18% per year) (N.C. Gen. Stat. § 47F-3-115(b), § 47C-3-115(b)), and
- other charges (such as those connected with the preparation and recordation of documents, including amendments to the declaration or statements of unpaid assessments). (N.C. Gen. Stat. § 47F-3-116(a), § 47C-3-116(a)).
Notice Required Before the HOA/COA Files the Lien
No fewer than 15 days prior to filing the lien, an HOA or COA must mail a statement of the assessment amount due to the property owner by first-class mail (N.C. Gen. Stat. § 47F-3-116(b), § 47C-3-116(b)).
Notice Required Regarding Attorneys’ Fees and Costs
An HOA or COA is entitled to recover the reasonable attorneys' fees and costs that it incurs in connection with the collection of any sums due, but first must notify the homeowner in writing of the association's intent to seek payment of attorneys' fees, costs, and expenses (N.C. Gen. Stat. § 47F-3-116(e), § 47C-3-116(e)).
Contents of the notice. The notice must include the outstanding balance due as of the date of the notice and give the owner 15 days from the mailing date to pay the outstanding balance without the attorneys' fees and court costs. If the owner pays the outstanding balance within this period, then he or she does not have to pay attorneys' fees, costs, or expenses (N.C. Gen. Stat. § 47F-3-116(e), § 47C-3-116(e)).
Payment plans. The notice must also give the owner the opportunity to contact a representative of the HOA or COA to discuss a payment schedule for the outstanding balance, as well as provide the name and telephone number of the representative (N.C. Gen. Stat. § 47F-3-116(e), § 47C-3-116(e)).
Notice of Lien Also Required
Before the HOA or COA files the actual claim of lien, it must serve (or attempt to serve) a copy of the claim of lien to the owner of the property by personal service or first-class mail (N.C. Gen. Stat. § 47F-3-116(c), § 47C-3-116(c)).
Lien priority determines what happens to other liens, mortgages, and lines of credit if your HOA or COA lien is foreclosed. (To learn more about lien priority and its importance in HOA foreclosures, see What happens to my mortgages if the HOA forecloses on its lien?)
In North Carolina, an HOA lien or COA lien has priority over all liens and encumbrances except for:
- liens and encumbrances recorded before the claim of lien is filed (specifically including, but not limited to, a mortgage or deed of trust), and
- liens for real estate taxes and other governmental charges (N.C. Gen. Stat. § 47F-3-116(d), § 47C-3-116(d)).
HOA and COA Foreclosures in North Carolina
If you default on the 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 North Carolina, an HOA or COA may nonjudicially foreclose the lien (which means the foreclosure takes place without court supervision) if the assessment remains unpaid for 90 days or more (N.C. Gen. Stat. § 47F-3-116(f), § 47C-3-116(f)). (Learn more about Judicial v. Nonjudicial Foreclosures.)
Pre-Foreclosure Notice Required
Prior to starting a nonjudicial foreclosure, the association must give the owner notice of the association's intention to initiate a foreclosure (N.C. Gen. Stat. § 47F-3-116(f)(5), § 47C-3-116(f)(5)).
Nonjudicial Foreclosure Limitation
If the lien consists solely of fines, interest on unpaid fines, or attorneys' fees incurred solely associated with fines, then an HOA or COA cannot use nonjudicial procedures to foreclose the lien. Instead, it must foreclose judicially by filing a lawsuit (N.C. Gen. Stat. § 47F-3-116(h), § 47C-3-116(h)).
Statute of Limitations for HOA and COA Liens
A lien for unpaid assessments is extinguished (eliminated) unless proceedings to enforce the lien are begun within three years after the claim of lien is filed (N.C. Gen. Stat. § 47F-3-116(c), § 47C-3-116(c)). This is called the statute of limitations.
What to Do if You Are Facing Foreclosure by an HOA or COA in North Carolina
If you are facing an HOA or COA foreclosure, you should consult with an attorney licensed in North Carolina 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.)