In Alabama, if your home is part of a homeowners' association (HOA) or condominium owners' association (COA) and you fall behind in assessments:
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.
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 an HOA or COA. 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 Covenants, Conditions, and Restrictions (CC&Rs) or Declaration of Condominium and state law, most HOAs and COAs 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.
Under the Alabama Homeowners' Association Act, an HOA gets a lien for unpaid assessments on and from the date the assessment is due. (Ala. Code § 35-20-12).
The HOA must give the property owner written notice of the assessment and lien by personal delivery or first-class mail. (Ala. Code § 35-20-12).
Within 12 months from the date the assessment becomes due, the HOA has to record a statement of lien in the office of the judge of probate. At least 30 days before recording the statement of lien, the HOA has to give the owner a written notice by certified mail. (Ala. Code § 35-20-12).
In Alabama, a COA gets a lien on a unit for any assessments or fines imposed against the owner from the time the assessment or fine becomes due. (Ala. Code § 35-8A-316(a)).
Alabama law sets out the types of charges that may be included in the assessments lien. (Ala. Code § 35-8A-316(a)). Unless the declaration of condominium provides otherwise, the association may include:
If you make a written request, the COA must provide you with a statement of the unpaid assessments that are due. If the association doesn't mail or otherwise provide you with the statement within ten business days after receiving your request, the lien is released. You remain liable for the debt, but the lien is extinguished. The COA may charge up to $25 for issuing the statement. (Ala. Code § 35-8A-316(h)).
Once an HOA or COA has a lien, it may foreclose.
Under the Alabama Homeowners' Association Act, an HOA lien may be foreclosed as provided in the declaration (or other governing documents) or judicially. Notice of the sale must be by publication once a week for three consecutive weeks in the counties in which the property is located. (Ala. Code § 35-20-12).
In Alabama, a COA may foreclose on its lien in the same manner as a mortgage on real estate. But the association must give reasonable advance notice to the unit owner and all lienholders of record of the unit. (Ala. Code § 35-8A-316(a)).
For the lien to remain valid, the COA must bring an action to enforce the lien within three years after the full amount of the assessments becomes due. (Ala. Code § 35-8A-316(e)).
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 up to date on your mortgage. Instead, lien priority determines what happens in a foreclosure.
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 can adjust lien priority.
Under Alabama law, an HOA assessments lien has priority over subsequent liens, except for:
A COA lien is prior to all other liens except for:
But in Alabama, six months' worth of delinquent common expense assessments have super-lien status over a first mortgage or deed of trust. The association's six-month priority lien doesn't include the association's costs or attorneys' fees in enforcing its lien. (Ala. Code § 35-8A-316(b)).
If you're facing an HOA or COA foreclosure in Alabama, consider consulting with a foreclosure attorney to discuss all legal options available in your circumstances.