Homeowners’ associations (HOAs) exist in planned communities or specific real estate developments throughout Arizona. These associations are designed to keep real estate developments up to specific standards as prioritized by the HOA board and members, focusing on physical upkeep and improvements. If you have questions about HOAs or HOA assessment liens, your Phoenix real estate lawyers can help.
A.R.S. § 33-1802 defines a “planned community” as a real estate development owned, operated, or containing an easement held by a non-profit corporation or owners’ association. The purpose of the non-profit or association is to manage, maintain, or improve the property. The declarations for the lots, parcels, or units in the development expressly state that the owners are mandatory members and must pay assessments to the association to support those purposes.
Defining HOA Assessment Liens
HOA assessment liens automatically occur when assessments owed to an HOA become due, and the homeowner fails to pay them. Under A.R.S. § 33-1807, “[t]he association has a lien on a unit for an assessment levied against that unit from the time the assessment becomes due.” The amount of the lien includes the amount of the unpaid assessment, late charges, reasonable collection fees, and attorney’s fees. An HOA lien is superior to all other liens on the home, except those recorded before the declaration, first mortgages, and liens for real estate taxes other governmental assessments.
How HOA Liens Work
HOA liens are automatic, meaning that an HOA doesn’t need to do anything to place a lien on your home. Unlike other types of liens, an HOA does not need to record a notice to perfect the lien, although it often does so to increase the amount of the lien and put the public on notice of the lien. Once you fail to pay an HOA assessment, the HOA has a lien on your home. When you purchase a home in a planned community, you agree to the HOA placing liens on your home if you don’t pay your HOA assessments.
Potential Consequences of HOA Assessment Liens
An HOA can and will foreclosure on an HOA assessment lien if you don’t pay the assessment as it becomes due. Even if you have a mortgage on the home, the HOA can still foreclose on the property and have it sold at sheriff’s sale, subject to the first mortgage. Even if you have second or third mortgages on the home, it does not prevent the foreclosure of an HOA assessment lien.
However, an HOA must take action to enforce an HOA assessment lien within six years after the total amount of the assessment becomes due. If the HOA does not take enforcement action within this timeframe, the lien is automatically extinguished, and the HOA can no longer enforce the lien.
An HOA assessment lien also acts as a “cloud” on your title. As a result, if you want to sell your home or refinance your mortgage loan, you typically must pay off the HOA assessment lien before you can take either one of these actions.
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