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 Property Owners' Association Act (Va. Code Ann. § 55.1-1800 and following) governs HOA activities in Virginia, while the Condominium Act (Va. Code Ann. § 55.1-1900 and following) applies to condominiums created after July 1, 1974 (and supersedes the state's older Horizontal Property Act). The two sets of laws are very similar when it comes to assessments liens, with a few minor differences.
In Virginia, 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 Virginia, an HOA is entitled to a lien if you don't pay the assessments. To perfect its lien, the HOA must file a memorandum of lien in the clerk's office of the circuit court in the county or city where the development is located within 12 months from the time the first assessment became due and payable. (Va. Code Ann. § 55.1-1833).
The HOA must mail written notice to the homeowner at least ten days before filing the lien. (Va. Code Ann. § 55.1-1833).
A COA in Virginia is also entitled to a lien if a condo owner doesn't pay the assessments. To perfect its assessments lien, the COA must record the lien in the clerk's office of the circuit court in the county or city in which the condo is located within 90 days from the time the first assessment became due and payable. (Va. Code Ann. § 55.1-1966).
In Virginia, an HOA or COA may foreclose its lien nonjudicially, which means the foreclosure takes place without court supervision.
As part of the foreclosure, the HOA or COA must first give notice to the homeowner or condo owner providing at least 60 days to pay the debt and, if the debt isn't paid, that the property can be sold in a foreclosure sale. The notice must also state that the owner has the right to bring a lawsuit challenging the existence of the debt or to raise another defense to the foreclosure. (Va. Code Ann. § 55.1-1833, § 55.1-1966).
The HOA or COA must advertise the time, date, and place of the sale, among other things, in a newspaper, usually once a week for four weeks. (Va. Code Ann. § 55.1-1833, § 55.1-1966).
The HOA or COA must also mail or personally deliver a copy of the newspaper advertisement (or a notice that contains the same information) to the owner. If mailed, the advertisement or notice must be sent by certified or registered mail no less than 14 days before the sale. (Va. Code Ann. § 55.1-1833, § 55.1-1966).
The homeowner or condo owner may prevent the foreclosure sale by paying the past-due assessments, plus all expenses and costs that the HOA or COA incurred in perfecting and enforcing the lien, such as advertising costs and reasonable attorneys' fees. (Va. Code Ann. § 55.1-1833, § 55.1-1966).
An HOA or COA must initiate the foreclosure action or file a lawsuit to collect the debt within 36 months after the date the memorandum of lien is recorded. (Va. Code Ann. § 55.1-1833, § 55.1-1966).
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.
In Virginia, once the HOA or COA lien is perfected, that lien is prior to all other liens and encumbrances, except for:
So, a foreclosure by an HOA or COA usually 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 Virginia, consider consulting with a foreclosure attorney to discuss all legal options available in your particular circumstances.