Homeowners’ associations, or HOAs, exist in many planned housing developments and communities throughout Arizona. The purpose of HOAs is to develop specific priorities for those real estate developments, which typically focus on physical upkeep and improvements that benefit all homeowners within those developments. In addition, HOAs ensure homeowners abide by rules implementing those priorities and pay their fair share of assessments to support those measures.
When homeowners fail to pay their HOA assessments, HOAs may place HOA assessment liens on their properties. Understanding how HOA assessment liens operate can be crucial when you live and own property within one of these real estate developments. Having an Arizona real estate lawyer on your side to answer your questions and explain the potential impact of an HOA assessment lien on your property is vital to protecting your real estate interests.
HOAs and Planned Communities
A.R.S. § 33-1801 et seq. applies to all “planned communities.” A.R.S. § 33-1802(4) defines a “planned community” as a real estate development in which an “association” of owners holds an easement or covenant to maintain roadways. The association’s purpose is to manage, maintain, or improve the property. Property owners within a planned community are mandatory association members, as required by declarations in their real estate deeds. Therefore, they must pay assessments to the associations to support these purposes. Planned communities do not include timeshare plans or associations, condominiums, or real estate developments not managed or maintained by an association.
Accordingly, under A.R.S. § 33-1802(1), an “association” is “a nonprofit corporation or unincorporated association of owners that is created pursuant to a declaration to own and operate portions of a planned community and that has the power under the declaration to assess association members to pay the costs and expenses incurred in the performance of the association’s obligations under the declaration.“
HOA Assessment Liens
A.R.S. § 33-1807 governs HOA assessment liens. Under this section, the HOA has a lien on a unit for any assessment it levies against it from the time the assessment becomes due. When you buy a home in a planned community, you agree that you are subject to HOA assessment liens if you don’t pay your HOA assessments as they become due. In other words, HOA assessment liens are automatic; if you don’t pay your HOA assessments, the HOA automatically has a lien on your home by law.
HOA assessment liens have priority over other liens on the property, except concerning liens recorded before the HOA declaration was recorded, recorded first mortgages on the property, liens for real estate taxes or other governmental assessments, or a few other types of liens.
Foreclosure of HOA Assessment Liens
An HOA can foreclose on an HOA assessment lien, along with late fees, reasonable collection fees, and reasonable attorney fees and costs, in the same way that a mortgage lender can foreclose on a mortgage lien on real estate. Even if you have a mortgage on your property, your HOA can foreclose on it and have it sold at a sheriff’s sale. Proceeds from the sale will go to pay your mortgage loan, the HOA assessment lien, and any other liens and sale costs. As a result, the consequences of not paying your HOA assessments can be severe.
An HOA assessment lien also acts as a “cloud” on your property title, which is problematic if you want to sell your home or refinance your mortgage loan. In most cases, you must pay the HOA assessment lien before you can sell the home or refinance your mortgage.
An HOA cannot pursue foreclosure of an HOA assessment lien until the property owner has been delinquent in paying assessments for at least one year or $1,200 or more, whichever occurs first. The minimum amount of $1,200 excludes late fees, collection costs, and attorney fees but must consist solely of the delinquent HOA assessment amount.
In a court action filed under § 33-1807, any judgment or decree shall include an award of attorney fees and costs for the prevailing party. After a court enters a judgment in a civil suit for late charges, fees, monetary penalties, interest, and similar charges, and the HOA records that judgment in the county recorder’s office, those amounts also become a lien on the property. However, an HOA cannot foreclose on this type of lien but only on the lien for the unpaid HOA assessments. The lien for the fees and costs is effective only on the conveyance of any interest in the property.
However, an HOA assessment lien is extinguished unless the HOA initiates proceedings to enforce the lien within six years after the full amount of the assessment becomes due. Therefore, if your HOA fails to take action to enforce the lien within this timeframe, they no longer have the legal right to enforce the lien.
We Are Here to Help You with Your Legal Needs
We aim to help you understand how HOAs and their assessment liens may affect your property. With our assistance, you will know what to expect and how to respond to potential disputes involving these liens. Contact the offices of Provident Law today at (480) 388-3343 or online and schedule an appointment to speak with our Arizona real estate attorneys about your legal matter.