In Maryland, if your home is part of a homeowners' association (HOA) or condominium owners' association (COA) and you fall behind in assessments:
If the HOA or COA initiates a foreclosure, you might have a defense to the action. Or you might be able to negotiate a way to get caught up on the overdue amounts and save your home.
When you buy a single-family home, townhome, or condominium in a planned community with covenants, you'll most likely pay fees and assessments, often collectively called "assessments," to an HOA or COA. If you fall behind in the assessments, the association will likely initially 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 might try other ways to collect from you. The association could take away your privileges to use the common facilities or file a lawsuit for a money judgment against you.
Based on the association's Declaration of Covenants, Conditions, and Restrictions (CC&Rs) or Declaration of Condominium and state law, most HOAs and COAs also have the power to get a lien on your property if you become delinquent in assessments. Once you fall behind in payments, a lien will usually automatically attach to your property. Sometimes, 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.
An assessments lien clouds the title to the property, hindering your ability to sell or refinance the home. In addition, the property can also be foreclosed to force a sale to a new owner—even if the property has a mortgage.
Maryland law specifies the types of charges that a COA may include in an assessments lien.
To find out which charges an HOA in Maryland may include in its lien, check the association's governing documents, like the CC&Rs.
While late charges and various other charges imposed by an HOA or COA generally constitute a lien on your property, an association may only foreclose a lien that consists solely of:
Be aware that the HOA or COA can use other means to enforce a lien for additional amounts, like suing you for the money owed.
Any action to foreclose a lien must be started within 12 years after the date a statement of lien is recorded. (Md. Code Ann., Real Prop. § 14-204(c)).
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.
In most cases, first mortgages or deeds of trust have priority over an HOA or COA lien. But under certain circumstances, an HOA or COA lien for delinquent assessments can have priority even over a lender's first mortgage or deed of trust. This kind of lien is called a "super lien."
Maryland law states that if a mortgage or deed of trust holder forecloses, four months' worth of unpaid regular HOA or COA assessments for common expenses (not including interest, collection costs, late charges, fines, attorneys' fees, special assessments, or any other costs) get priority over a first mortgage or deed of trust recorded on or after October 1, 2011. The super lien is limited to a maximum of $1,200. (Md. Code Ann., Real Prop. § 11B-117(c), 11-110(f)).
If you're facing an HOA or COA foreclosure in Maryland, consider consulting with a foreclosure attorney to discuss all legal options available in your circumstances.