If you live in a house, condo, or townhome that’s part of a common interest community, you’re likely responsible for paying dues and assessments to the homeowners’ association (HOA) or condominium association (COA). If you don’t pay, in most cases, the HOA or COA can get a lien on your property, and could potentially foreclose that lien.
Read on to learn about the particular requirements for HOA and COA foreclosures in Arizona.
In Arizona, there are two separate sets of statutes that govern association liens. One covers HOAs in planned communities (Ariz. Rev. Stat. § 33-1801 et seq.) and the other covers COAs (Ariz. Rev. Stat. § 33-1201 et seq.).
The two sets of laws are very similar.
In most cases, once you fall behind in payments, the HOA or COA can get a lien on your property. Almost all HOAs and COAs 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 Arizona, the lien attaches to the property at the time the assessment becomes due. (Ariz. Rev. Stat. § 33-1807(A), § 33-1256(A)). The HOA or COA does not have to record the lien in the county records in order for it to be valid. (Ariz. Rev. Stat. § 33-1807(E), § 33-1256(E)). (In some states, though, the association must record the lien.)
Arizona law limits the types of charges that the HOA or COA may include in the assessments lien. (Ariz. Rev. Stat. § 33-1807(A), § 33-1256(A)). Generally, the association may include, along with the past-due assessments:
If you default on the assessments, the HOA or COA can foreclose. 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 has nothing to do with whether you are current on your home loan.
In Arizona, the HOA or COA may foreclose on its lien in the same manner as a mortgage lender can foreclose on a mortgage. (Ariz. Rev. Stat. § 33-1807(A), § 33-1256(A)). Because mortgages in Arizona must be foreclosed judicially, this means that the HOA or COA must file a lawsuit in court to foreclose its lien (Ariz. Rev. Stat. § 33-721). Arizona home loans, on the other hand, are usually secured by a deed of trust, rather than a mortgage, so residential foreclosures in Arizona are typically nonjudicial.
In addition, Arizona has laws that limit the HOA’s or COA’s ability to foreclosure in certain circumstances. The HOA/COA can’t foreclose unless:
At least 30 days before authorizing an attorney or a collection agency to begin collection activities, the association has to mail (by certified mail, return receipt requested) a written notice to the unit owner at the unit owner's address. The notice must state:
Your account is delinquent. If you do not bring your account current or make arrangements that are approved by the association to bring your account current within thirty days after the date of this notice, your account will be turned over for further collection proceedings. Such collection proceedings could include bringing a foreclosure action against your property.
The notice must be in boldfaced type or all capital letters and include the contact information for the person that the unit owner may contact to discuss payment.
An association’s lien is prior to all other liens, except for:
For the lien to remain valid, the HOA or COA must initiate an action to enforce the lien within six years from the date that the full amount of the assessments became due. (Ariz. Rev. Stat. § 33-1807(F), § 33-1256(F)).
If you’re behind in assessments and facing an HOA or COA foreclosure, consider consulting with an attorney licensed in Arizona to discuss all legal options available in your particular circumstances.