Texas HOA and COA Foreclosures

When you buy a single-family home, townhome, or condominium that's part of a planned community with covenants, you'll most likely pay fees and assessments, often collectively called "assessments," to a homeowners' association (HOA) or condominium owners' association (COA).

If your home is part of an HOA or COA and you fall behind in assessments in Texas:

• The HOA or COA can usually get a lien on your home.
• The association typically can charge you for overdue assessments, late charges, interest, and attorneys' fees and costs.
• If the association chooses to foreclose the lien, the process might be judicial or nonjudicial
• An association can't foreclose a lien that consists solely of fines.
• You have the right to redeem the property after an HOA or COA forecloses.

If the HOA or COA initiates a foreclosure, you might have a defense to the action, or you might be able to negotiate a way to get caught up on the overdue amounts and save your home.

How an HOA or COA Collects Overdue Assessments

If you fall behind in the assessments, the association will likely first 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 will probably try other ways to collect from you. The association might take away your privileges to use the common facilities or file a lawsuit to get a money judgment against you.

Most HOAs and COAs Can Also Get a Lien on Your Home

Based on the association's Covenants, Conditions, and Restrictions (CC&Rs) and state law, an HOA or COA can usually get a lien on your home if you're delinquent in paying the assessments. In some cases, 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.

Not only will an assessments lien cloud the title to the property, which hinders your ability to sell or refinance the home, but the property can also be foreclosed to force a sale to a new owner—even if the property has a mortgage.

How HOA and COA Liens Work, Generally

In Texas, an HOA gets the authority to collect assessments and place a lien on your home primarily from its governing documents, such as the CC&Rs. COAs, on the other hand, get this right from state law. (Tex. Prop. Code Ann. § 82.102(a)(2), § 82.113). (A COA will also often include a provision in its governing documents about its right to collect assessments and place a lien on the condo if the owner falls behind in payments, just to cover all bases.)

Perfection of the HOA or COA Lien in Texas

State law provides that a COA lien is automatically created when the condominium declaration (the instrument that created the condominium) is recorded. (Tex. Prop. Code Ann. § 82.113(c)). This action constitutes record notice and perfection of the lien. Unless the declaration provides otherwise, no other recordation of a lien or notice of lien is required.

Texas doesn't have a comparable law for HOAs. So, an HOA declaration will often state that a lien is automatically created when the declaration is recorded. Many HOAs record notices of assessments lien in the county records as well.

Charges the HOA or COA May Include in Its Lien

Texas law sets out the types of charges that a COA may include in the assessments lien. Unless the association's governing documents provide otherwise, the lien may consist of the following:

• unpaid assessments
• late fees
• interest
• collection costs
• attorneys' fees
• other fees
• fines, and
• any other amount the homeowner owes the COA. (Tex. Prop. Code Ann. § 82.113(a)).

Review the association's governing documents to find out which charges an HOA may include in its lien.

HOA and COA Lien Foreclosures in Texas

State laws often place particular due process requirements on HOAs and COAs regarding how and when an association can foreclose an assessments lien. For instance, Texas law doesn't permit an HOA or COA to foreclose a lien that consists of just fines.

COA Foreclosures in Texas

A COA may foreclose its lien judicially or nonjudicially, except that the association may not foreclose a lien that consists solely of fines. (Tex. Prop. Code Ann. § 82.113(e)). Nonjudicial foreclosures are governed by Chapter 51 of the Texas Property Code. But the declaration might limit the association to judicial foreclosures only.

HOA Foreclosures in Texas

An HOA in Texas may foreclose its assessments lien:

• judicially or
• nonjudicially (if the governing documents expressly authorize it and if the HOA first obtains authorization from the court through an expedited judicial procedure, unless the owner opts out of the expedited process). (Tex. Prop. Code Ann. § 209.0092(c)). After the HOA gets a court order giving it authority to foreclose nonjudicially, it uses the same process that COAs use to nonjudicially foreclose under Chapter 51 of the Texas Property Code.

Also, the declaration might restrict the type of foreclosure process. And an HOA may not foreclose a lien for assessments that consists solely of:

• fines
• attorney's fees that are solely associated with fines, or
• amounts due to the HOA for compiling, producing, and reproducing its records. (Tex. Prop. Code Ann. § 209.009).

Right of Redemption Following Foreclosure

Texas law provides homeowners with a redemption period following an HOA or COA foreclosure.

Redemption Period After an HOA Forecloses

If an HOA forecloses, the former owner may redeem the home within 180 days from the date the HOA mails the homeowner a post-foreclosure notice of redemption rights. (Tex. Prop. Code Ann. § 209.011(b)).

Redemption Period After a COA Forecloses

If a COA forecloses, the former owner may redeem the unit within 90 days after the foreclosure sale date. (Tex. Prop. Code Ann. § 82.113(g)).

Cost to Redeem

To redeem the property if the HOA or COA purchases the property at the foreclosure sale, you must pay:

• all amounts due to the association at the time of the foreclosure sale
• interest
• reasonable attorneys' fees and costs
• any assessments levied after the foreclosure sale, and
• any reasonable costs incurred by the association, including maintenance and leasing costs. (Tex. Prop. Code Ann. § 209.011(d), § 82.113(g)).

HOA and COA 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 current on your mortgage payments. 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.

Lien Priority of HOA and COA Liens in Texas

A COA lien for unpaid assessments has priority over all other liens except:

• a lien for real property taxes (and other governmental assessments)
• a lien or encumbrance recorded before the declaration is recorded
• a lien for the construction of improvements or an assignment of the right to insurance proceeds recorded before the date the assessment becomes delinquent (unless the declaration provides otherwise), and
• a first mortgage or deed of trust recorded before the date on which the assessment becomes delinquent. (Tex. Prop. Code Ann. § 82.113(b)).

To find out the priority of an HOA lien, check the association's governing documents. Most Texas HOA documents state that state tax liens and certain mortgages, like first mortgages, have priority over an assessments lien.

So, a foreclosure by an HOA or COA usually won't eliminate a first mortgage because the association's lien is normally lower in priority.

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

Texas laws covering HOA and COA foreclosures are complicated and extensive. If you're facing an HOA or COA foreclosure in Texas, consider consulting with a foreclosure attorney to discuss all legal options available in your particular circumstances.