A Lien?

Yes, the contractor can file a lien. It's called a "Mechanic's lien". Either side can file a lien. It's whichever side of the signed contract didn't get paid per the terms of the agreement. However, it isn't quite immediate and proof of burden will have to be shown. The HOA should receive paperwork with a chance to respond to the lien. Warning, these cases can tend to lead into lawsuits in small claims. I'd recommed getting an attorney ready...

this situation isn't atypical of a HOA. It happens more often than you think. The terms of a contract should be scrutinized as much as possible prior to signing. Your HOA couldn't just fire the contractor because they didn't like a "color" they painted. There are terms in the contract that justifies the conditions of termination.

Our HOA faced a situation years before I was President. One of the first presidents had signed a contract with a lawncare company. It is the ONLY responsibility technically our HOA is to provide. However, it appears that president changed his mind on who he wanted to hire and hired another contractor. The original contractor was angry and was able to win the agreed amount they would have gotten IF they had finished the contract out. Which meant OUR HOA had to pay them AND the actual contractor doing the work.

It's important to get a lawyer with expertise in contractual law at this point. If he does decide to sue, the wait for the suit and do NOT sue him. It's cheaper to counter-sue and a better option for the HOA.