If you don't pay your homeowners' association (HOA) dues or assessments, the HOA can foreclose on your home. But even if you lose your home to an HOA foreclosure, some states have a law that gives you the opportunity to get the property back after the foreclosure sale. This limited amount of time you can reclaim the home is called a "redemption period."
During the redemption period, if state law provides one, you can buy back, or "redeem," the property from the entity or person that bought it at the foreclosure sale.
If an HOA has a lien on a homeowner's property, it may foreclose, as permitted by the Covenants, Conditions, and Restrictions (CC&Rs) and state law. The HOA can foreclose either through judicial foreclosure or a nonjudicial foreclosure, again, depending on state law and the terms in the CC&Rs.
To judicially foreclose an assessments lien, the HOA must file a lawsuit against the homeowner and obtain a judgment from the court granting permission to sell the home to satisfy the HOA's lien. To nonjudicially foreclose, the HOA doesn't have to go through state court, but rather follows specific procedures as dictated by state law, as well as the CC&Rs.
HOAs sometimes foreclose when homeowners owe relatively minor amounts of unpaid dues and assessments. Redeeming the property can be a good way to get your home back. Again, some states, including California and Texas, among others, give homeowners a right of redemption following a foreclosure by an HOA.
In California, for example, if an HOA forecloses using a nonjudicial process, the foreclosure is subject to a 90-day right of redemption after the sale. (Cal. Civ. Code § 5715). Generally, though, California foreclosure law doesn't provide a redemption period after the nonjudicial foreclosure of a deed of trust.
Texas law provides a 180-day right of redemption from date the HOA mails written notice of the sale to the homeowner. (Tex. Prop. Code Ann. § 209.011). With a condominium, the right of redemption is 90 days. (Tex. Prop. Code Ann. § 82.113).
During the redemption period, the purchaser of the property may not transfer ownership of the property. This restriction is because the highest bidder at the foreclosure sale—which might be either the HOA or a third party—takes ownership of the property subject to the owner's right of redemption.
Some other states have redemption periods after an HOA foreclosure, too. Talk to a local attorney to find out about the laws in your state. And even if your state law doesn't provide a specific right of redemption after an HOA foreclosure, your state might have another law allowing a redemption period following the foreclosure of a mortgage lien, which could apply to an HOA foreclosure as well. But some states don't provide a right of redemption at all.
In most cases, to redeem the property following the foreclosure sale, the homeowner must pay:
Sometimes, under state law, the redeemer must pay other allowable charges as well. For instance, in California, if a homeowner wishes to exercise the right of redemption, the redemption price will include any repair costs the purchaser paid that were reasonably necessary for the preservation of the property. (Barry v. OC Residential Properties, LLC, 194 Cal.App.4th 861 (2011)). The buyer at the foreclosure sale may pay for maintenance and repair work if:
Then, if the homeowner chooses to redeem the property, the redeeming homeowner must reimburse the purchaser for those expenses.
If you're behind in paying assessments to an HOA and can't afford to get caught up, you might be able to work out a repayment plan with the association. By paying the amounts you owe in installments, you might be able to avoid a foreclosure. It's a good idea to contact your HOA as soon as you fall behind in assessments—before a foreclosure begins—to arrange a payment plan.
HOA laws are different in each state. So, the actual process to redeem might be complicated and can vary from place to place. To find out if your state has a law that provides a redemption period following a foreclosure by an HOA and, if so, the process for redeeming, talk with an attorney. An attorney can also tell you about all legal options available in your particular circumstances, like potentially fighting the foreclosure in court. If you need information about various ways to avoid a foreclosure, consider talking to a HUD-approved housing counselor.