As HOA attorneys in Arizona, we frequently receive questions from HOA boards about how to handle delinquent accounts and whether foreclosure is an option. If you have had questions along these lines, we aim to answer them in this article.

Under Arizona law, an account is eligible for foreclosure if the owner is delinquent in payment of amounts secured by the lien for a period of one year, or if the amount owed is at least $1,200.

There are some encumbrances that take precedent over the HOA’s lien. For example, any encumbrance that was recorded before the Association’s Declaration was recorded, any First Deeds of Trust (mortgages) recorded against the property and any tax liens in place against the unit all receive higher priority than an HOA lien. Any other encumbrances that may exist, such as recorded judgments or second mortgages, will be extinguished when the association forecloses on the lien it has on a property.

A quick look at the foreclosure process

Assuming the property is eligible for foreclosure, you can then begin the foreclosure process. Keep in mind that the average cost of a foreclosure action is between $5,500 and $6,500—this is one of the reasons why lenders tend to do everything they can to avoid foreclosure, as there are some upfront costs on their end they must contend with.

You can expect the foreclosure process to take about three to six months in total before the property is ultimately sold off at a Sheriff’s Sale. Here’s a quick look at the steps in the process:

• After filing the complaint and serving paperwork, the defendant has up to 10 days to answer that complaint.
• If there is an answer to the complaint, you may then file a motion for summary judgment, which can take about two weeks. Allow another 30 days for a response, another 15 days to reply to that response and another 30 to 60 days for the court to rule and issue a final judgment before all the judgment documents go to the sheriff.
• If there is no response to the complaint, you can submit an application for entry of default within 10 days. Within another two to three weeks you can have a default hearing, at which you will obtain the judgment and then submit all judgment documents to the sheriff.
• After the sheriff has all judgment documents (usually about 30 days after the judgment, give or take a few days) you can then set the date of the Sheriff’s Sale of the property, which typically comes between 30 and 60 days after the Sheriff has all the required documentation.
• The Sheriff’s Sale has several possible outcomes. Either the owner pays the full amounts owed and the sale gets canceled, a third party bids on the property or nobody bids on the property. In the third circumstance, the association becomes the owner by default.

For more information about the foreclosure process and foreclosure eligibility under HOA rules, contact Goodman Law Group to speak with an HOA attorney in Arizona.