When you buy a single-family home, townhome, or condominium that's part of a planned community with covenants, you'll most likely pay fees and assessments, often collectively called "assessments," to a condominium owners' association (COA) or homeowners' association (HOA). If you fall behind in the assessments, the association will likely first try to collect the debt using traditional methods. For instance, the association will probably call you and send letters. But if those tactics don't get you to pay up, the association will probably try other ways to collect from you. The association might take away your privileges to use the common facilities or file a lawsuit to get a money judgment against you.
Most COAs and HOAs also have the power to get a lien on your property if you become delinquent in assessments. Not only will an assessments lien cloud the title to the property, which hinders your ability to sell or refinance the home, but the property can also be foreclosed to force a sale to a new owner—even if the property has a mortgage.
If your home is part of a COA or HOA and you fall behind in assessments in Louisiana:
If the COA or HOA initiates a foreclosure, you might have a defense to the action, such as the association charged you too much, imposed unreasonable fees, or failed to follow state laws. Or you might be able to negotiate a way to get caught up on the overdue amounts and save your home. For example, you might be able to pay off the entire delinquency, negotiate a reduced payoff amount, or enter into a repayment plan.
The Louisiana Condominium Act (La. Rev. Stat. Ann. §§ 9:1121.101 through 9:1124.115) governs COA activities in Louisiana, while the Louisiana Homeowners Association Act and subsequent laws covering privileges (see below) (La. Rev. Stat. Ann. §§ 9:1141.1 through 9:1148) govern HOAs.
The specific rules regarding the operation of your particular COA or HOA can be found in the association's governing documents, like the Declaration of Covenants, Conditions, and Restrictions (CC&Rs) or Declaration of Condominium and bylaws.
Based on the association's declaration and state law, most COAs and HOAs 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. In some cases, the association will record its lien with the county recorder to provide public notice that the lien exists, regardless of whether state law requires recording.
In Louisiana, a COA or HOA has what is called a "privilege" (an assessments lien) if the owner fails to pay the assessments. To be preserved, the COA or HOA must record a "claim of privilege" in the mortgage records in the parish in which the property is located. (La. Rev. Stat. Ann. § 9:1123.115(A)(2), § 9:1146).
A COA or HOA in Louisiana is generally permitted to include the following charges in its lien:
Further, if a condo unit owner fails to timely pay the assessments for a period of three months or more during any eight-month period—and the COA provides notice to the owner as legally required—the COA may accelerate one year of condo fees in advance and file a privilege for this amount. (La. Rev. Stat. Ann. § 9:1123.115(A)).
A COA must provide seven days' notice to the owner before filing the claim of privilege. Notice must be by personal service, or registered or certified mail, and include the date the assessment became delinquent or accelerated. (La. Rev. Stat. Ann. § 9:1123.115(A)(3)).
An HOA must serve the delinquent owner with a sworn detailed statement of the claim by certified mail, registered mail, or personal delivery at the same time the lien is filed. (La. Rev. Stat. Ann. § 9:1146).
Once a COA or HOA has a lien, it may foreclose.
A COA privilege is extinguished if a notice of filing a lawsuit is not recorded within five years after recording the privilege. (La. Rev. Stat. Ann. § 9:1123.115(B)). An HOA must initiate an action to enforce the lien within five years after recording the privilege. (La. Rev. Stat. Ann. § 9:1147).
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 isn't dependent on whether you're up to date on your mortgage. Instead, lien priority determines what happens in a foreclosure.
The priority of liens establishes who gets paid first following a foreclosure sale and often determines whether a lienholder will get paid at all. Liens generally follow the "first in time, first in right" rule, which says that whichever lien is recorded first in the land records has higher priority than later recorded liens. A first-lien has a higher priority than other liens and gets the first crack at the foreclosure sale proceeds. If any proceeds are left after the first lien is paid in full, the excess proceeds go to the second lienholder until that lien is paid off, and so on. A lien with a low priority might get nothing from a foreclosure sale.
But state law or an association's governing documents can adjust lien priority.
A COA's assessments lien is prior to all other liens and encumbrances, except for:
HOA liens in Louisiana are prioritized based on the date of recordation. (La. Rev. Stat. Ann. § 9:1148). So, an association lien will likely be junior in priority to a first mortgage.
If you're facing an HOA or COA foreclosure in Louisiana, consider consulting with a foreclosure attorney to discuss all legal options available in your particular circumstances.