Homeowners in planned communities with a homeowners’ association (HOA) generally have to pay dues and special assessments to the association. The dues pay for common area maintenance and improvements to community facilities. If you fall behind in your HOA dues and assessments, you'll need to get caught up; otherwise, the HOA can most likely get a lien on your home that could potentially lead to a foreclosure.
The HOA community's rules are outlined in what's called the Declaration of Covenants, Conditions, and Restrictions (CC&Rs). The CC&Rs typically allow the HOA to place a lien on your property if you stop paying the monthly fees or any special assessments. Depending on the terms in the CC&Rs, the HOA lien amount might include the unpaid assessments, late charges, attorneys’ fees, fines (in some cases), and interest. Once the HOA gets a lien on your property, it may foreclose on that lien as permitted by the CC&Rs and state law. To avoid an HOA's foreclosure, you might consider:
Depending on state law and the terms of the CC&Rs, you might have several different options for getting caught up before the HOA initiates a foreclosure. And, if your HOA forecloses because you stopped paying, you might be able to get your home back if your state provides a right of redemption.
The quickest way to get caught up and prevent an 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 can't come up with enough cash to get current on your HOA dues all at once, you might be able to convince the HOA to accept a reduced amount to satisfy the debt. The likelihood of this tactic working is questionable, though. Some HOAs will make a deal with you, but others won't even consider it.
If the HOA isn't open to the idea of accepting a reduced amount, it might consider allowing you to enter into a payment plan to get caught up on delinquent amounts. State law might even require the HOA to offer a payment plan. Colorado law, for example, requires HOAs to offer payment plans to homeowners who are behind in dues. Under Colorado law, an 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, like a foreclosure, against the homeowner. (Colo. Rev. Stat. § 38-33.3-316.3).
If the HOA forecloses on your home, some states give you a “redemption period” to repurchase your property following the foreclosure sale. California law, for example, provides homeowners a 90-day right of redemption after a nonjudicial HOA foreclosure.
Suppose your state doesn't provide a specific right of redemption after an HOA foreclosure. In that case, another state law that allows you to redeem the property following a mortgage foreclosure sale might apply to an HOA foreclosure as well.
HOAs sometimes foreclose even if a homeowner only owes a relatively small amount of outstanding dues. If you're struggling to pay your HOA dues, contact the HOA as soon as possible to let them know you intend to pay and to find out what options are available for getting caught up before the foreclosure process begins.
If your HOA is threatening you with a foreclosure or has already initiated the process, consider consulting with an attorney in your state. A lawyer can tell you about all legal options available in your particular circumstances.