North Carolina HOA and COA Foreclosures

If you default on HOA or COA payments in North Carolina, the association could potentially foreclose on your condo, townhome, or house.

People who live in a planned development are usually part of a homeowners' association (HOA) or condominium owners’ association (COA), which is typically a nonprofit corporation responsible for managing and maintaining the community. An HOA or COA has a lot of power over the residences and homeowners in a planned community. The association creates and enforces the rules of the community, as well as determines how much members have to pay in monthly dues and assessments (collectively referred to as “assessments”).

Residents who live in a community setting—whether it’s a condominium, townhouse, or single-family home—in North Carolina usually have to pay assessments to their HOA or COA. If you fall behind in payments, in most cases, the HOA or COA can get a lien on your home that could lead to a foreclosure.

In this article, you’ll learn about HOA and COA foreclosures, and other related laws, in North Carolina.

Where to Find North Carolina’s HOA and COA Lien Laws

The North Carolina Planned Community Act (N.C. Gen. Stat. §§ 47F-1-101 through 47F-3-122) governs HOA activities, while the North Carolina Condominium Act (N.C. Gen. Stat. §§ 47C-1-101 through 47C-4-120) applies to condominiums created after October 1, 1986. (Many of the provisions of the Condominium Act discussed in this article also apply to condos created before this date.)

The two sets of laws are very similar.

How HOA and COA Liens Work

Most HOAs and COAs have the power to place a lien on your home if you become delinquent in paying the monthly dues or assessments. In North Carolina, an HOA or COA is entitled to a lien for unpaid assessments and related charges once the amount due is 30 days late. The lien becomes effective when the HOA or COA files a claim of lien with the clerk of the superior court in the county where the property is located. (N.C. Gen. Stat. § 47F-3-116(a), § 47C-3-116(a)).

Charges the HOA or COA May Include in the Lien

State law and the HOA or COA’s governing documents, such as the Declaration of Covenants, Conditions, and Restrictions (CC&Rs) and bylaws, often set out the type of charges that may be included in the lien.

In North Carolina, an HOA or COA is permitted to include charges like the following in its lien, unless the governing documents provide otherwise:

  • past-due assessments
  • late charges (not to exceed the greater of $20 per month or 10% of any unpaid assessment) (N.C. Gen. Stat. § 47F-3-102(11), § 47C-3-102 (11))
  • fines for violations of the CC&Rs
  • interest on past-due common expense assessments (not to exceed 18% per year) (N.C. Gen. Stat. § 47F-3-115(b), § 47C-3-115(b)), and
  • other charges, like those connected with the preparation and recordation of documents, including amendments to the declaration or statements of unpaid assessments. (N.C. Gen. Stat. § 47F-3-116(a), § 47C-3-116(a)).

Notice Required Before the HOA/COA Files the Lien

No fewer than 15 days before filing the lien, an HOA or COA must mail a statement of the assessment amount due to the property owner and property address by first-class mail. (N.C. Gen. Stat. § 47F-3-116(b), § 47C-3-116(b)).

Notice Required Regarding Attorneys’ Fees and Costs

An HOA or COA is entitled to recover the reasonable attorneys' fees and costs that it incurs in connection with the collection of any sums due, but first must notify the homeowner in writing of the association's intent to seek payment of attorneys' fees, costs, and expenses. (N.C. Gen. Stat. § 47F-3-116(e), § 47C-3-116(e)).

Contents of the notice. The notice must include the outstanding balance due as of the date of the notice and give the owner 15 days from the mailing date to pay the outstanding balance without the attorneys' fees and court costs. (N.C. Gen. Stat. § 47F-3-116(e), § 47C-3-116(e)).

Payment plans. The notice must also give the owner the opportunity to contact a representative of the HOA or COA to discuss a payment schedule for the outstanding balance, as well as provide the name and telephone number of the representative. (N.C. Gen. Stat. § 47F-3-116(e), § 47C-3-116(e)).

Notice of Lien Also Required

Before the HOA or COA files the actual claim of lien, it must serve or mail a copy of the claim of lien to the owner of the property by personal service or first-class mail. (N.C. Gen. Stat. § 47F-3-116(c), § 47C-3-116(c)).

Lien Priority

Lien priority determines what happens to other liens, mortgages, and lines of credit if an HOA or COA lien is foreclosed.

In North Carolina, an HOA lien or COA lien has priority over all liens and encumbrances except for:

  • liens and encumbrances recorded before the claim of lien is filed (specifically including, but not limited to, a mortgage or deed of trust), and
  • liens for real estate taxes and other governmental charges. (N.C. Gen. Stat. § 47F-3-116(d), § 47C-3-116(d)).

This law doesn’t affect the priority of mechanics' or materialmen's liens.

HOA and COA Foreclosures in North Carolina

If you default on the assessments, the HOA or COA can foreclose. A common misconception is that the association can’t foreclose if you’re current with your mortgage payments. But the association’s right to foreclose has nothing to do with whether you’re caught up on your home loan.

In North Carolina, an HOA or COA may foreclose the lien, usually nonjudicially, which means the foreclosure takes place without court supervision. The assessment must remain unpaid for 90 days or more before a foreclosure can start. (N.C. Gen. Stat. § 47F-3-116(f), § 47C-3-116(f)).

Preforeclosure Notice Requirement

Before starting a nonjudicial foreclosure, the association must give the owner notice of the association's intention to foreclose. (N.C. Gen. Stat. § 47F-3-116(f)(5), § 47C-3-116(f)(5)).

Nonjudicial Foreclosure Limitation

If the lien consists solely of fines, interest on unpaid fines, or attorneys' fees incurred solely associated with fines, then an HOA or COA can't use nonjudicial procedures to foreclose the lien. Instead, it must foreclose judicially by filing a lawsuit. (N.C. Gen. Stat. § 47F-3-116(h), § 47C-3-116(h)).

Statute of Limitations for HOA and COA Liens

A lien for unpaid assessments is extinguished (eliminated) unless proceedings to enforce the lien are begun within three years after the claim of lien is filed. (N.C. Gen. Stat. § 47F-3-116(c), § 47C-3-116(c)).

Talk to a Lawyer

If you’re behind in assessments and facing an HOA or COA foreclosure, consider consulting with an attorney licensed in North Carolina to discuss all legal options available in your particular circumstances.

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