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 homeowners' association (HOA) or condominium owners' association (COA). 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 HOAs and COAs 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 Missouri:
If the COA or HOA 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.
Different sets of state laws often govern HOAs in subdivision communities and COAs. In Missouri, the Uniform Condominium Act (Mo. Rev. Stat. § 448.1-101 through 448.4-120) applies to condominiums created after September 28, 1993. The provisions discussed in this article also apply to condominiums created before this date.
HOAs in Missouri are often incorporated as nonprofit corporations and are subject to the state statutes that govern such corporations. Missouri's Nonprofit Corporation Law is in Chapter 355 of the Missouri Revised Statutes. Also, the policies regarding the operation of the HOA, including those regarding assessments liens, can be found in the association's governing documents, like the Declaration of Covenants, Conditions, and Restrictions (CC&Rs) and bylaws. The Declaration is a publicly-recorded document, and you should have received copies of this document when you purchased your property.
Based on the association's governing documents, like the CC&Rs, and state law, a COA or HOA can usually get a lien on your home if you're delinquent in paying the assessments.
In Missouri, a COA is entitled to a lien for assessments from the time the assessments are due. If an assessment is payable in installments, the full amount of the assessment is a lien from the time the first installment becomes due. (Mo. Rev. Stat. § 448.3-116(1)).
The recording of the condo declaration constitutes record notice of the existence of the lien. (Mo. Rev. Stat. § 448.3-116(4)). So, the COA doesn't have to record a claim of lien for it to be effective. (In some states, COAs have to record their liens.)
If you're part of an HOA in Missouri, check the association's governing documents to learn about the association's right to get a lien on your home if you don't pay the assessments.
State law and the COA or HOA's governing documents will usually set out the type of charges that an association may include in the lien.
In Missouri, unless the declaration provides otherwise, a COA is permitted to include the following charges in its lien:
If you make a written request, the COA must provide you with a statement setting forth the amount of unpaid assessments within ten business days after it receives your request. (Mo. Rev. Stat. § 448.3-116(8)).
To find out which charges a Missouri HOA may include in its lien, check the association's governing documents, like the CC&Rs.
Once the association has a lien, the COA or HOA may foreclose.
In Missouri, a COA's lien may be foreclosed in the same manner as a mortgage on real estate by filing a lawsuit in court. It may also be foreclosed by power of sale (a typical Missouri nonjudicial foreclosure), which happens outside of court. (Mo. Rev. Stat. § 448.3-116(1)).
A COA must start the foreclosure within three years after the full amount of the assessments becomes due otherwise the lien is extinguished (eliminated) and it loses the right to foreclose. (Mo. Rev. Stat. § 448.3-116(5)).
To find out about an HOA's right to foreclose if you become delinquent in paying the assessments, read the association's CC&Rs.
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 paid up 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 might adjust lien priority.
In Missouri, a COA lien is generally prior to all other liens. But certain other liens, including the following, have priority over a COA lien:
But under Missouri law, six months' worth of common expense assessments based on the periodic budget the COA adopted get super-lien status. (Mo. Rev. Stat. § 448.3-116(2)).
Missouri law doesn't cover the priority of HOA liens. So, to find out the priority of an HOA lien, read the association's governing documents. HOA liens are usually subordinate to a first lien deed of trust, but not always.
If you're facing a COA or HOA foreclosure in Missouri, consider consulting with a foreclosure attorney to learn more about the law and how it applies to your situation and to discuss all legal options available in your particular circumstances.