If you live in a planned development, you’re probably part of a homeowners' association (HOA) or condominium owners’ association (COA). The HOA or COA is typically a nonprofit corporation responsible for managing and maintaining the community. The association has a lot of power over the residences and homeowners in a planned community. It creates and enforces the rules of the community, as well as determines how much members have to pay in dues and assessments (collectively referred to as “assessments”).
Residents who live in this kind of a community setting—whether it’s a condominium, townhouse, or single-family home—in Hawaii usually have to pay assessments to their HOA or COA. If you fall behind in those payments, the HOA or COA can get a lien on your home that could lead to a foreclosure.
Read on to learn about HOA and COA foreclosures and related laws in Hawaii.
In Hawaii, planned community associations (HOAs) are governed by Haw. Rev. Stat. §§ 421J-1 to 421J-15. Condominiums created after July 1, 2006, are governed by Haw. Rev. Stat. §§ 514A-1 through 514A-135, while those created prior to that date are governed by §§ 514B-1 through 514B-163.
Most HOAs and COAs have the power to place a lien on your home if you become delinquent in paying the assessments. Once you fall behind in payments, a lien will usually automatically attach to your property.
The priority of an HOA lien in Hawaii is determined by the association documents or, if no priority is provided in the association documents, by the date the lien is recorded. (Haw. Rev. Stat. § 421J-10.5(a)).
A COA lien for unpaid assessments has priority over all other liens except:
(Learn more about what lien priority is and what happens to a first mortgage in an association foreclosure in What happens to my mortgages if the HOA forecloses on its lien?)
All unpaid sums assessed by the association are a lien against the unit. (Haw. Rev. Stat. § 421J-10.5(a), § 514B-146(a)). So, an HOA or COA may generally include certain charges and penalties in the lien, including:
If you default on the assessments, the HOA or COA may foreclose. A common misconception is that the association can’t foreclose if you’re up to date with your loan payments. But the association’s right to foreclose has nothing to do with whether you’re current on your mortgage payments.
In Hawaii, an HOA or COA may foreclose its lien judicially or nonjudicially. (Haw. Rev. Stat. § 421J-10.5(a), § 514B-146(a)). Though, HOAs and COAs have an alternative nonjudicial foreclosure process under state law, which is separate from foreclosures that mortgage lenders conduct. (Haw. Rev. Stat. § 667-91 and following).
Under Hawaii’s alternative nonjudicial foreclosure process, the association must prepare and record a Notice of Default and Intention to Foreclose, which must be served to the delinquent owner and other parties. The owner then has:
Associations must accept “reasonable” payment plans. Basically, a reasonable payment plan consists of payment of the current amounts due plus a payment plan for the delinquent balance that can be completed within 12 months. (The board of directors may approve payment plans that last longer.) (Haw. Rev. Stat. § 667-92).
If the parties don’t agree on a payment plan and the default isn’t cured, the association may sell the home at a public sale after publishing notice of the sale and providing notice to the homeowner and other parties. The sale may take place:
An HOA or COA can’t nonjudicially foreclose a lien that arises solely from fines, penalties, legal fees, or late fees. The foreclosure of any such lien must be filed in court. (Haw. Rev. Stat. § 421J-10.5(a), § 514B-146(a)).
Proceedings to enforce an HOA or COA lien must begin within six years after the assessment became due. (Haw. Rev. Stat. § 421J-10.5(a), § 514B-146(a)). But if the homeowner files bankruptcy, the statute of limitations is tolled (suspended) until 30 days after the automatic stay is lifted. (Haw. Rev. Stat. § 421J-10.5(a), § 514B-146(a)).
If you’re behind in assessments and facing an HOA or COA foreclosure in Hawaii, consider consulting with a local attorney to discuss all legal options available in your particular circumstances.