Homeowners in planned, covenanted communities are generally required to pay dues and special assessments to a homeowners’ association (HOA) to cover things like common area maintenance and improvements to community facilities. If you fall behind in your HOA dues and assessments, you will need to get caught up. Otherwise, the HOA can get a lien on your home that could lead to a foreclosure. Read on to learn about the different ways that you can bring past-due HOA amounts current so you can avoid a foreclosure.
The rules of an HOA community are set forth in what is called the Declaration of Covenants, Conditions, and Restrictions (CC&Rs). (Learn more in Nolo’s article Homeowners' Associations (HOAs) and CC&Rs.)
The CC&Rs typically allow the HOA to place a lien on your property if you stop paying the monthly fees and/or any special assessments. Depending on the terms in the CC&Rs, you can be held responsible for paying:
Once the HOA obtains a lien on your property, it may foreclose on that lien as permitted by the CC&Rs and state law. (Learn more about homeowners’ association liens and how they can be foreclosed in Nolo’s article HOA Liens & Foreclosures: An Overview.)
Some states, like California, only allow a HOA to foreclose after a certain amount of past-due assessments have accumulated or a certain amount of time has passed. (To learn about the laws governing HOA foreclosures in your state, review your state’s statutes. You can find out how to do your own legal research in Nolo’s Laws and Legal Research section.)
If you are behind on your HOA dues, there are several options for you to get caught up before the HOA initiates a foreclosure. And, if your HOA forecloses because you stopped paying the dues, you may be able to get your home back if your state provides a right of redemption.
The quickest way to get caught up and prevent the HOA from pursuing a foreclosure is to pay all of the past-due amounts in one lump sum, including any late fees or other fees.
If you cannot come up with enough cash to get current on your HOA dues all at once, you may be able to convince the HOA to accept a reduced amount to satisfy the debt. The likelihood of this tactic working is questionable though. There are some HOAs that will make a deal with you to help you get current, but there are others that simply will not.
If the HOA is not open to the idea of accepting a reduced amount to bring you current, it may consider allowing you to enter into a payment plan to get caught up on your HOA dues.
Colorado law, in fact, requires HOAs to offer payment plans to homeowners who are behind in HOA dues. As of January 1, 2014, a Colorado HOA must make a good-faith effort to coordinate with a delinquent homeowner to set up a payment plan to pay off past-due assessments and other delinquent payments before pursuing legal action, such as a foreclosure, against the homeowner. (Learn more in HOA Laws in Colorado.)
If you are behind in HOA dues and are thinking about filing for bankruptcy, there are some special considerations you should keep in mind.
You can (temporarily) stop an HOA from foreclosing by filing bankruptcy. You can halt a foreclosure by filing for bankruptcy due to something called an automatic stay, which immediately goes into effect when you file. The stay functions as an injunction prohibiting the HOA from foreclosing on your home during the bankruptcy process. However, this will likely only provide a temporary reprieve because the HOA will probably seek permission from the bankruptcy court to continue with the foreclosure.
HOA dues in a Chapter 7 bankruptcy. If you file for Chapter 7 bankruptcy, you may be able to discharge (eliminate) any HOA dues that you owe. This can work great if you intend to give up your home in the bankruptcy, but if you plan on staying in the home, you’ll have to pay the dues to avoid a foreclosure. (This is because, even though the bankruptcy can eliminate your personal liability for the HOA dues, the lien remains on your home. Learn more in Nolo’s article Can I Discharge HOA Dues in Chapter 7 Bankruptcy?)
HOA dues in a Chapter 13 bankruptcy. In a Chapter 13 bankruptcy, HOA dues that accrued before you file are generally treated as secured claims. This means that if there is equity in your property at the time you file your bankruptcy, your Chapter 13 plan must provide for payment to the HOA. If your house is underwater (where you owe more on the mortgage than the house is worth), then the HOA lien can be stripped, but you’ll still have to pay future dues if you plan to continue living in the home. (Learn more in Nolo’s article HOA Dues in a Chapter 13 Bankruptcy.)
If the HOA forecloses on your home, some states give you a “redemption period” to repurchase your property following the foreclosure sale.
A redemption period is a specific time period given to homeowners following foreclosure during which they can buy back, or “redeem,” their property from the entity or person that purchased it at the foreclosure sale. California law, for example, provides homeowners a 90-day right of redemption after a nonjudicial HOA foreclosure. (Learn more about redemption periods.)
If your state does not provide a specific right of redemption after an HOA forecloses, there may be a state law that allows you to redeem the property following a mortgage foreclosure sale, which may apply to an HOA foreclosure as well.
HOAs have been known to foreclose even if a homeowner only owes a relatively small amount of outstanding dues. If you are struggling to pay your HOA dues, it is recommended that you contact the HOA as soon as possible to let them it you intend to pay and to find out what options are available for getting caught up before the foreclosure process begins.
If your HOA has already initiated a foreclosure, it is recommended that you consult with a licensed attorney in your state to discuss all legal options available in your particular circumstances.