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.
Different sets of state laws often govern HOAs in subdivision communities and COAs. The Homeowner Association Act (N.M. Stat. Ann. §§ 47-16-1 to 47-16-18) governs HOA activities in New Mexico, while the Condominium Act (N.M. Stat. Ann. §§ 47-7A-1 through 47-7D-20) applies to all condominiums created after 1982. The state's Building Unit Ownership Act (N.M. Stat. Ann. §§ 47-7-1 through 47-7-28) covers older condominiums unless the association's board passes a resolution subjecting the development to the newer Condominium Act. This article focuses on the Homeowner Association Act and the Condominium Act, and these two sets of laws are very similar.
In New Mexico, if your home is part of an HOA or 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.
Based on the association's Covenants, Conditions, and Restrictions (CC&Rs) and state law, an HOA or COA can usually get a lien on your home if you're delinquent in paying the assessments. In New Mexico, recording the lien isn't required. (N.M. Stat. Ann. § 47-16-6(C), § 47-7C-16(C)). In some cases, though, the association will record its lien with the county recorder to provide public notice that the lien exists, even though state law doesn't require recording.
In New Mexico, an HOA or COA is entitled to a lien for any assessment due or fines imposed against the owner from the time the assessment or fine becomes due. If an assessment is payable in installments, the full amount of the assessment constitutes a lien from the time the first installment becomes due. (N.M. Stat. Ann. § 47-16-6(B), § 47-7C-16(A)).
State law and the HOA or COA's governing documents will usually set out the type of charges that may be included in the lien.
In New Mexico, a COA is permitted to include the following in its lien, unless the governing documents provide otherwise:
To find out which particular charges a New Mexico HOA may include in its lien, check the HOA's governing documents.
If you make a written request, the HOA or COA must provide you with a statement setting forth the amount of the unpaid assessments against your home within ten business days after it receives your request. (N.M. Stat. Ann. § 47-16-6(D), § 47-7C-16(G)).
Under New Mexico law, an association's lien may be foreclosed in the same way as a mortgage on real estate. (N.M. Stat. Ann. § 47-16-6(B), § 47-7C-16(A)). Mortgage foreclosures in New Mexico are judicial, so HOAs and COAs use the judicial process to foreclose an assessments lien.
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 might adjust lien priority.
The COA governing documents will set forth which liens take priority over a COA lien. (N.M. Stat. Ann. § 47-7C-16(H)). Likewise, to find out the priority of an HOA lien, check the association's governing documents.
Usually, a foreclosure by an HOA or COA won't eliminate a first mortgage because the association's lien is normally lower in priority.
If you're facing an HOA or COA foreclosure in New Mexico, consider consulting with a foreclosure attorney to discuss all legal options available in your particular circumstances.