If you don't pay the fees and special assessments that your homeowners' association (HOA) imposes, in most cases, a lien will automatically attach to your property. The lien will typically attach to the home as of:
However, in some states, the lien has to be recorded to be effective.
The association's CC&Rs might contain a provision stating that any HOA lien is subordinate to a first mortgage, even if the mortgage was recorded after the HOA lien was perfected. State law might also determine the priority of an HOA lien.
HOA liens are often junior to first-mortgage liens. But in some states, an HOA lien gets "super-lien" status, making it superior to a first-mortgage lien.
Generally, priority is determined by a lien's recording date. The general rule is "first in time, first in right." That is, prior liens have more rights. For example, a mortgage's priority is generally determined by its recording date.
Some liens, however, like property tax liens, have automatic priority over essentially all other liens. And in many states, the priority of an HOA lien is determined by the CC&R's recording date or when the assessments were due.
The matter of priority typically comes up in foreclosure actions because if a senior lienholder forecloses, it wipes out any junior liens. But if a junior lienholder forecloses, its foreclosure is subject to any senior liens.
A "super lien" is a category of lien that, under a state statute, is given a higher priority than other types of liens. When it comes to HOA liens, a "super lien" refers to that portion of a homeowners' association lien that's given higher priority than even a first-mortgage holder, placing the HOA's interest in front of the first mortgage.
Approximately 20 states have laws that give HOA liens or, in some cases, condominium association (COA) liens super-lien status under certain circumstances.
In Colorado, for example, HOAs have a super lien that has priority over a first deed of trust to the extent of six months' worth of common expense assessments that would have become due before a foreclosure. (Colo. Rev. Stat. § 38-33.3-316). In Nevada, nine months of assessments have super-lien status. (Nev. Rev. Stat. § 116.3116).
When a first-mortgage lender forecloses subject to a super lien, the HOA gets repaid first out of the foreclosure sale proceeds, up to the allowable amount of the super lien, usually a certain number of months of overdue assessments. Then, any additional sale funds go toward paying off the first mortgage holder.
If the foreclosure sale generates excess proceeds over what's needed to pay off the super lien and the first mortgage, any junior lienholders get those funds. After all the liens are paid off, any leftover money goes to the foreclosed homeowner.
Generally, if the first mortgage lender forecloses but the property isn't in a super-lien state, an HOA lien gets extinguished in the lender's foreclosure. Again, if the foreclosure sale generates excess proceeds over what's needed to pay off the first mortgage, any junior lienholders, like the HOA, get those funds. After all the liens are paid off, any leftover money goes to the foreclosed homeowner.
Once the foreclosure sale has been completed and all redemption periods have expired, the purchaser at the foreclosure sale is responsible for paying current and future HOA assessments.
If the HOA forecloses a super lien, it might (depending on state law) eliminate the first mortgage. So, when a lender gets notice that an HOA has initiated a foreclosure in a super-lien state, in most cases, the lender will pay off the super-lien amount to preserve its position as the first-lien holder.
The lender then tacks the amount it paid onto the borrower's total mortgage debt and seeks reimbursement from the borrower. If the borrower fails to reimburse the lender, the lender might foreclose.
A common justification for giving super-lien status to HOA liens is that HOAs help preserve the community's value. It's been argued that neighborhoods suffer from deferred maintenance and other problems if their fees remain unpaid. Super liens help ensure that HOAs receive the funds needed to maintain their community.
If you have further questions about how super liens work or lien laws in your state, consider talking to a local lawyer.