If your home is part of a condominium owners' association (COA) or homeowners' association (HOA) in New York and you fall behind in assessments:
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.
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 a COA or HOA. 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 Condominium or Declaration of Covenants, Conditions, and Restrictions (CC&Rs) and state law, most COAs and HOAs 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.
State law and the COA or HOA's governing documents will usually set out the type of charges that may be included in the lien.
Under New York law, a COA lien may include unpaid common charges plus interest and is effective from and after the date that a verified notice of lien is recorded in the county records. (N.Y. Real Prop. Law § 339-z, aa).
The lien expires six years after the filing date. (N.Y. Real Prop. Law § 339-aa).
An HOA, generally, is allowed to include charges like the following in its lien:
Review the association's governing documents, such as the CC&Rs, to learn what charges an HOA may charge.
Once a COA or HOA has a lien, it might foreclose.
State law says that a COA lien may be foreclosed by suit, like a mortgage of real property. (N.Y. Real Prop. Law § 339-aa).
To find out about an HOA's right to foreclose, review the association's governing documents, like the 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 current on your mortgage payments. Instead, lien priority determines what happens in a foreclosure.
Generally, a foreclosure by a COA or HOA usually won't eliminate a first mortgage because the association's lien is normally lower in priority.
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.
New York's Condominium Act states that a COA lien is prior to all other liens except for:
To determine an HOA lien's priority, check the association's governing documents.
New York laws covering COA or HOA foreclosures are complicated and extensive. If you're facing a COA or HOA foreclosure in New York, consider consulting with a foreclosure attorney to discuss all legal options available.