One issue that commonly plagues homeowner associations (HOAs) is the ability to make timely collections of HOA fees from members. There may come a time when a member becomes delinquent on their HOA assessments, at which point you may be wondering what recourse you have from an HOA standpoint to collect the money you’re owed.
The most common method of collections in these circumstances is to use an assessment lien, which allows an HOA to sell off the homeowner’s property to repay the assessments owed to the association. Under an assessment lien, a homeowner is also prohibited from refinancing or selling a property subject to an assessment lien themselves until the lien is fully satisfied.
Here is some information about assessment liens and HOA collections from an experienced HOA legal counsel in Arizona.
Developing an assessment lien
Most of the time, an assessment lien is formed automatically against a homeowner’s property when the homeowner goes past due on payments. HOAs will typically create a “Notice of Lien” document that goes on public record with the county recorder’s office. The document describes the property that is subject to the lien, as well as how much is owed to the HOA.
Just about every single HOA has the power to place such liens on properties owned by HOA members who have fallen past due on their assessments. HOAs were granted this power with the adoption of the Arizona Planned Community Act and the Arizona Condominium Act. The HOA must be classified as a “planned community” or “condominium” for it to have this power.
So, what exactly makes for a “planned community” or “condominium” under state law? This primarily depends on ownership of common areas in the community. In a condo, homeowners have equal ownership stake in all of the common areas. In planned communities, however, the common areas are actually owned by the HOA.
While there are some HOAs that might not be categorized either as condominiums or planned communities, that does not mean they do not have assessment lien rights. While Arizona state law might not guarantee those HOAs assessment lien rights, the governing documents (i.e. articles of incorporation) for that HOA may give it the right to place assessment liens on properties.
Collecting assessment liens
HOAs are required to file lawsuits and receive favorable judgments before they can legally foreclose assessment liens. This can be a very expensive and time-consuming process, so it’s typically a last resort for HOAs after they have already exercised all other available options.
Assessment liens will be automatically ended if the collection proceedings are not brought forth within three years. HOAs are still allowed to sue homeowners for up to six years of unpaid assessments, though, so it’s important for homeowners to keep that statute of limitations in mind.
For more information about the collections process in a homeowner association and about assessment liens, contact Goodman Law Group to arrange a consultation with qualified HOA legal counsel in Arizona. We look forward to assisting you.