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Started by MaureenM1 • 28 replies • 1802 views

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MaureenM1 (PA)
Posts: 344

Posted:

I am the President of a 40 unit townhome association in PA. Recently our builder sold all of his properties that he owned to ONE investor. They own 12 in all and may be buying a short sale unit. They structured the ownership between husband and wife 7 and 5. The property management company told us about this after the transaction had been made.

I was concerned about the Fannie Mae and Freddie Mac requirements that do not allow one person to own more than 10 percent in a development. My concern turned into reality when I receive an email from a couple in the development that was not able to refiance because of the Freddie and Fannie requirements.

This owner sent an email to all homeowners which included the brother of the builder (who sold his units). I received an email from our new management company that was sent by the investors that they are restructuring their properties as to not to cause problems in the development.

I want to consult our attorney as our bylaws state that if an amendment is necessary to conform to Federal Home Loan MOrtgage Corporations with respsect to condouminum projects then at any time and from time to time the Executive Board may effect an appropriated corrective amendment without the approval of the Unit Owners or the holders of any liens on all or part of the Property, upon receipt by the Exeuctive Board of an opinon from independent legal counsel to the effect that the proposed amendment is permitted by the terms of this sentence.

It want to prevent this from happening again. I realize investors can structure their purchases regardless, however, we are a 40 home development with two investors that own 16 homes.

Can the Executive Board amend the bylaws/CCR's? I would love to limit rentals but I know that is a bigger hurdle to overcome and the ones that are now rented would be grandfathered. Should I consult our attorney to see if anything can be done for the future of our development.

Sorry this is so wordy....

Maureen

LarryB13 (Arizona)
Posts: 4,099

Posted:

Maureen,

Definitely schedule time with your association's attorney.

You are fortunate to have language allowing the board to amend the declaration to conform to federal lending requirements. You need to act before the investment owners pack the board with their own candidates. Investors now own 40 percent of your units and given the usual apathy of owner-occupants they will easily control the board after the next election.

I would not shed any tears for the investors. They purchased knowing that they would cause problems for the rest of the owners and did not care. The maximum number they could own would have been four. The bad news is that John Smith will sell 3 of his units and Jane Smith will sell on of her units. The "buyer" will be John Smith, Jr., age 5.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

To me what would I care as long as the investors pay their dues? They need to pay the HOA dues on ALL those properties. I would be more upset if that were the case. Step back and look for the trees and NOT the forrest on this one. How is your board set up and how much power do they really have? How interested are they in running the place? 16 votes from non-board members don't equal up to 5 votes of any board if they aren't on it.

Plus it's not up to the HOA to put in rental restrictions. It's up to the mortgage companies. Unless the HOA owns all the property itself. It can't interfere with the contract of any owner. That would include renting.

There are other loan packages out there. It's not just the percentage of rental or investment property that people are denied loans. There are more factors out there than this. Fanny Mae or Freddi Mac or FHA type loans are government backed. They are more like the "No credit no problem" type loans in the real estate world. Potential buyers just will have to find other resources or put more money down on a home. Which means buyers with better credit and money.

Former HOA President

RogerB (Colorado)
Posts: 5,067

Posted:

Quote:

Posted By MelissaP1 on 11/05/2012 10:18 AM
To me what would I care as long as the investors pay their dues? They need to pay the HOA dues on ALL those properties. I would be more upset if that were the case. Step back and look for the trees and NOT the forrest on this one. How is your board set up and how much power do they really have? How interested are they in running the place? 16 votes from non-board members don't equal up to 5 votes of any board if they aren't on it.

Plus it's not up to the HOA to put in rental restrictions. It's up to the mortgage companies. Unless the HOA owns all the property itself. It can't interfere with the contract of any owner. That would include renting.

There are other loan packages out there. It's not just the percentage of rental or investment property that people are denied loans. There are more factors out there than this. Fanny Mae or Freddi Mac or FHA type loans are government backed. They are more like the "No credit no problem" type loans in the real estate world. Potential buyers just will have to find other resources or put more money down on a home. Which means buyers with better credit and money.

Melissa, I disagree with your statements. I recommend putting rental restrictions into the CC&Rs. Otherwise it may be difficult for a potential buyer to get a loan approved when the rental percentage gets too high.

MaureenM1 (PA)
Posts: 344

Posted:

Thank you for your responses. I spoke with our new property manager today and he agrees that we should have this in our CCRs. We have a board meeting on Monday and we will discuss.

This has already affected homeowners being able to refinance and it could affect potential buyers. I will be contacting our board attorney.

GlenL (Ohio)
Posts: 5,491

Posted:

This might stop future problems but I don't think it will help this one. Even amending the Covenants I do not believe you can force them to sell their property to comply. It would be the same as if you amended the covenants to prohibit sheds, those in existence at the time of the amendment would still be allowed as they were built before the prohibition. It would prohibit them from buying more units.

Studies show that 5 out of 4 people have problems with fractions

MelissaP1 (Alabama)
Posts: 13,836

Posted:

A HOA can't enforce rental restrictions even IF in their documents. The ONLY state that officially can do that in any degree is California. That just happened in the last year and only effects homes purchased since last year. All other states have various degrees on rental restrictions but none ban or restrict it completely.

I can write the rule all I want in my HOA documents. However, a good lawyer and that rule goes out the window. That simply is because the HOA does NOT own the property. It is an ASSOCIATION of owners. Only mortgage/banks can put restrictions on allowing rental or time limits when property can be leased. Sorry folks but wishful thinking doesn't make it true.

Former HOA President

BradP (Kansas)
Posts: 2,640

Posted:

Quote:

Posted By MelissaP1 on 11/05/2012 12:01 PM
A HOA can't enforce rental restrictions even IF in their documents. The ONLY state that officially can do that in any degree is California. That just happened in the last year and only effects homes purchased since last year. All other states have various degrees on rental restrictions but none ban or restrict it completely.

I can write the rule all I want in my HOA documents. However, a good lawyer and that rule goes out the window. That simply is because the HOA does NOT own the property. It is an ASSOCIATION of owners. Only mortgage/banks can put restrictions on allowing rental or time limits when property can be leased. Sorry folks but wishful thinking doesn't make it true.

Not true...if that were the case how can the HOA enforce any of the covenants, it doesn't own the land so that logic is flawed. It is basic contract law, the CC&R's are a contract and when you purchase a home you agree to the contract. If rental restrictions are added after the fact as long as they are done according to the contract you signed when you bought it is enforceable.

I would be curious to see the case law you have on the other 49 states that says it isn't enforceable as I know that isn't the case in the state I live, it is enforceable.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Okay lets say it is enforceable and in your documents. Exactly HOW is it enforceable? Can you place a lien on them? Can your Foreclose? Nope, as long as the owner is paying the dues NONE of that can happen. So you can't get rid of them. Can you fine them? Maybe. However, unless your HOA has a fine schedule, even that is limited. Plus if I was an owner in a desparate situation that needed to rent my property, I'd pay the fine and raise the rent. Most states do not allow a fine to be used as the basis for a lien or foreclosure so that brings us back to square one.

So yes, you may have the restrictions in your documents. Does it actually make it enforceable? Nope. Just makes for good feelings and false hopes. Sorry it's NOT what everyone wants to hear. I was told by a lawyer that unless the HOA actually owns ALL the homes in a HOA, it can't restrict the use of the property for rental except for maybe using them a Frat houses.

Former HOA President

BradP (Kansas)
Posts: 2,640

Posted:

Quote:

Posted By MelissaP1 on 11/06/2012 10:01 AM
Okay lets say it is enforceable and in your documents. Exactly HOW is it enforceable? Can you place a lien on them? Can your Foreclose? Nope, as long as the owner is paying the dues NONE of that can happen. So you can't get rid of them. Can you fine them? Maybe. However, unless your HOA has a fine schedule, even that is limited. Plus if I was an owner in a desparate situation that needed to rent my property, I'd pay the fine and raise the rent. Most states do not allow a fine to be used as the basis for a lien or foreclosure so that brings us back to square one.

So yes, you may have the restrictions in your documents. Does it actually make it enforceable? Nope. Just makes for good feelings and false hopes. Sorry it's NOT what everyone wants to hear. I was told by a lawyer that unless the HOA actually owns ALL the homes in a HOA, it can't restrict the use of the property for rental except for maybe using them a Frat houses.

How are the rest of your documents enforceable? How do you make someone paint their house or mow their lawn or plant a tree? You follow the provisions of your documents, why is renting so different than any other restriction, it isn't.

I would like to see your case law on fines not being able to be foreclosed and liened on? Is that based on fact or just a general statement? The statement of one attorney in Alabama should not be used as case law for 49 other states.

We don't have a rental restriction in our neighborhood, but if we did we would treat it like any other violation...we would send a notice, we would fine, we would either send to collections and pursue foreclosure or we would seek remedy in court. Well written restrictions will have a hardship clause in them.

Unless it is against city, county, state or federal laws what is in your CC&R's is enforceable and that does include rentals. Breach of contract, i.e. renting out your home, can be the basis for you losing in a court of law. If you can afford the dream team of lawyers you might have a shot to fight it, but who amongst us can.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Show me where fines can be the basis of liens or foreclosures? Fines are like speeding tickets. They are just puniitive not functional. Your HOA CAN follow through with violations such as painting, repairs, and other issues because they own control of those things. Common property is owned by ALL owners who have an interest and shared responsibility. You all contribute money to keep care of the common elements/property/appeal. You do NOT contribute to paying anyone's mortgage. If you all contributed to one's mortgage or were responsible for collecting rent from a tenant, then the HOA could indeed restrict the use of that.

Basically, since the HOA contributes no money to the upkeep of your own personal property, then it can't restrict the use of it. It can restrict the appearance and it's contribution rate to conform to the HOA requirements.

Former HOA President

BradP (Kansas)
Posts: 2,640

Posted:

Quote:

Posted By MelissaP1 on 11/06/2012 11:46 AM
Show me where fines can be the basis of liens or foreclosures? Fines are like speeding tickets. They are just puniitive not functional. Your HOA CAN follow through with violations such as painting, repairs, and other issues because they own control of those things. Common property is owned by ALL owners who have an interest and shared responsibility. You all contribute money to keep care of the common elements/property/appeal. You do NOT contribute to paying anyone's mortgage. If you all contributed to one's mortgage or were responsible for collecting rent from a tenant, then the HOA could indeed restrict the use of that.

Basically, since the HOA contributes no money to the upkeep of your own personal property, then it can't restrict the use of it. It can restrict the appearance and it's contribution rate to conform to the HOA requirements.

Straight from my documents "The Board shall have the authority to assess fines for any violation of the provisions contained in this Declaration....shall constitute a lien on the noncompliant Owner's Lot, and shall be subject to enforcement and foreclosure in the same manner as a special assessment as referenced in Article IV of this Declaration"

That was written by an attorney in Kansas who specializes in HOA's. And for the record, Article IV in our CC&R's spells out assessments, special assessments, foreclosure and liens.

Not trying to belittle you but you make no sense, you say they can go through with painting, repairs, etc. because that is controlled by the HOA and you reference common property. Yet you say the mortgage which controls the home that you reference as common property is untouchable. My home and my yard, other than the easement, is strictly my property and the HOA has zero claim on it. So how can they enforce restrictions on me, it isn't common property, no one else except my bank has a claim to my land and home?

BradP (Kansas)
Posts: 2,640

Posted:

Quote:

btw, you can end up in jail over a speeding ticket...just like any other misdemeanor criminal offense if you don't rectify the situation

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Brad

You say:

My home and my yard, other than the easement, is strictly my property and the HOA has zero claim on it. So how can they enforce restrictions on me, it isn't common property, no one else except my bank has a claim to my land and home?

Not getting in the middle of the discussion on liens/fines/claims you are having but are you aware that in many Covenants one agreed to, the HOA can enter your property and bring it upto to their "compliance" like rip down a non-approved fence one installed, repaint a house, cut the grass, etc. and bill the owner for it?

In an agreed upon association (like sign/agree with Covenants/Deed Restrictions), ones does surrender some rights for the greater good of the association.

Association living is not for all.

BradP (Kansas)
Posts: 2,640

Posted:

Quote:

Posted By JohnC46 on 11/06/2012 2:50 PM
Brad

You say:

My home and my yard, other than the easement, is strictly my property and the HOA has zero claim on it. So how can they enforce restrictions on me, it isn't common property, no one else except my bank has a claim to my land and home?

Not getting in the middle of the discussion on liens/fines/claims you are having but are you aware that in many Covenants one agreed to, the HOA can enter your property and bring it upto to their "compliance" like rip down a non-approved fence one installed, repaint a house, cut the grass, etc. and bill the owner for it?

In an agreed upon association (like sign/agree with Covenants/Deed Restrictions), ones does surrender some rights for the greater good of the association.

Association living is not for all.

John

I am well aware of that...just was trying to make a point...it is all contract and as long as it doesn't violate any laws it is enforceable.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Quote:

Posted By BradP on 11/06/2012 2:59 PM

John

I am well aware of that...just was trying to make a point...it is all contract and as long as it doesn't violate any laws it is enforceable.

Thanks

Just wanted to clarify.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

"The Board shall have the authority to assess fines for any violation of the provisions contained in this Declaration....shall constitute a lien on the noncompliant Owner's Lot, and shall be subject to enforcement and foreclosure in the same manner as a special assessment as referenced in Article IV of this Declaration"

You may have translated this statement in the wrong context. It is saying the HOA has the right to fine but NOT to use those fines as the BASIS for a lien or foreclosure. They are TWO different things. The statement gives the right for a HOA to use Fines to enforce violations but lacks definition on what consitutes a violation nor the amount of fine. Hence why many HOA's lack a "Fine schedule" to actually enforce this ability.

The second half references that you can include a non payment of a special assessment as part of the lien or foreclosure process. If your HOA has a special assessment and a member does not pay that special assessment, they may be subjected to a lien for it. That lien can then turn into a foreclosure of which that special assessment can be treated as not paying regular dues. A lien typically can be for unpaid dues, late fees, interest, legal fees for filing the lien, and state/HOA document allowed interest rate. It does NOT include fines. Although some HOA's use a method of which they may apply your HOA dues toward paying down your fine assessments leaving it appear you have not paid your monthly assessments. Which is something that is kind of gray area.

Let me put this in better perspective...(Although I am on cold medicine so bare with me). Think of your HOA as a "Taxi cab" company. The HOA/Cab company owns a huge parking lot. In order for you to be a part owner of the parking lot, you must own one of the cars parked there and pay a parking fee. That parking fee is used for paying for upkeep of the parking lot, car appearances/certain maintenance, and insurance. One owner decides to break the speed limit and is issued a ticket (fine) by the HOA/Taxi Company. They repeatedly do this but continue to pay their fee. How do you get rid of them? The reality is tickets just are punitive for corrective action. It is NOT a means of removing an owner. The owner still owns the car but the HOA just owns/controls the parking lot it's sitting in.

Same scenerio but this time an owner lends out their car. (Rental). The renter then speeds through the parking lot. The Taxi Cab/HOA issues a ticket but it has to be toward the OWNER of the vehicle. The owner of the vehicle is responsible for the care of the vehicle whether they are in it or not. The HOA can't take the car away from the renter. The Taxi cab/HOA doesn't own the actual car and thus can't interefere with it's use the owner allows. If the HOA did own the cars then it could regulate the use of the car. Again, the Taxi cab/HOA ONLY controls the parking lot.

I am tired so will have to hope this makes some sense later...

Former HOA President

MelissaP1 (Alabama)
Posts: 13,836

Posted:

I do need to say that I a probably revealing some "HOA Secrets" here in this post. I don't want to lend people to think their HOA is powerless and can't enforce the rules. Many people just assume to enforce rules by "Fines". However, if you dig deeper you find that HOA lack actual definition beyond just allowing a HOA to be able to fine. That is why a HOA needs to establish a defined schedule amongst ALL the owners as what defines a violation and what rate it is to be fined at upwards to max amount. It is that definition that gives the HOA more teeth in enforcement than just allowing it. However, it still doesn't mean the fines can be used for the basis of liens or foreclosures. What can be is IF the HOA steps in and fixes the violation themselves if the owner refuses. The HOA at their cost can fix the issue and send the bill to the owner if the owner doesn't take responsibility. IF the owner refuses to pay that bill, then that bill can be used for the basis of a LIEN. (Not foreclosure). That really is the only way a HOA can truly enforce/fix violations.

To get back to the OP, the Rental issue is also another "HOA secret" that many don't understand. The HOA can write rental restrictions all they want in their documents. It doesn't make it enforceable. Unless the HOA actually owns the mortgage on ALL the properties, it can't interfere with the contract of the property. If the HOA did own all the properties, it's most likely NOT a HOA. It's an apartment complex.

Sorry for posting again but having to stay up late...Realized that many may get the wrong idea and think they don't have to pay fines or the HOA lacks enforcement. It doesn't. The HOA just have to have definitions and understanding of their limitations...

Former HOA President

GlenL (Ohio)
Posts: 5,491

Posted:

Melissa, you are correct when you say fines cannot be the basis of a lien or foreclosure in several states that have specifically outlawed it but not every state. Just for fun I tried to find such a prohibition in Alabama but couldn't, perhaps you can provide a link.

Studies show that 5 out of 4 people have problems with fractions

BradP (Kansas)
Posts: 2,640

Posted:

Quote:

Posted By MelissaP1 on 11/07/2012 12:10 AM
"The Board shall have the authority to assess fines for any violation of the provisions contained in this Declaration....shall constitute a lien on the noncompliant Owner's Lot, and shall be subject to enforcement and foreclosure in the same manner as a special assessment as referenced in Article IV of this Declaration"

You may have translated this statement in the wrong context. It is saying the HOA has the right to fine but NOT to use those fines as the BASIS for a lien or foreclosure. They are TWO different things. The statement gives the right for a HOA to use Fines to enforce violations but lacks definition on what consitutes a violation nor the amount of fine. Hence why many HOA's lack a "Fine schedule" to actually enforce this ability.

The second half references that you can include a non payment of a special assessment as part of the lien or foreclosure process. If your HOA has a special assessment and a member does not pay that special assessment, they may be subjected to a lien for it. That lien can then turn into a foreclosure of which that special assessment can be treated as not paying regular dues. A lien typically can be for unpaid dues, late fees, interest, legal fees for filing the lien, and state/HOA document allowed interest rate. It does NOT include fines. Although some HOA's use a method of which they may apply your HOA dues toward paying down your fine assessments leaving it appear you have not paid your monthly assessments. Which is something that is kind of gray area.

Let me put this in better perspective...(Although I am on cold medicine so bare with me). Think of your HOA as a "Taxi cab" company. The HOA/Cab company owns a huge parking lot. In order for you to be a part owner of the parking lot, you must own one of the cars parked there and pay a parking fee. That parking fee is used for paying for upkeep of the parking lot, car appearances/certain maintenance, and insurance. One owner decides to break the speed limit and is issued a ticket (fine) by the HOA/Taxi Company. They repeatedly do this but continue to pay their fee. How do you get rid of them? The reality is tickets just are punitive for corrective action. It is NOT a means of removing an owner. The owner still owns the car but the HOA just owns/controls the parking lot it's sitting in.

Same scenerio but this time an owner lends out their car. (Rental). The renter then speeds through the parking lot. The Taxi Cab/HOA issues a ticket but it has to be toward the OWNER of the vehicle. The owner of the vehicle is responsible for the care of the vehicle whether they are in it or not. The HOA can't take the car away from the renter. The Taxi cab/HOA doesn't own the actual car and thus can't interefere with it's use the owner allows. If the HOA did own the cars then it could regulate the use of the car. Again, the Taxi cab/HOA ONLY controls the parking lot.

I am tired so will have to hope this makes some sense later...

I am done banging my head against a brick wall but will leave you with this...I didn't translate anything incorrectly i just mearly didn't type the entire statement because I hate typing. But, in between the dots it talks about assessing fines, talks about late fees and interest on those fines and talks about until it is paid in full it can be used as a lien against the property and also can be used as a method to foreclose just like special assessments.

I won't argue that some states do not allow this, however, the blanket statement you made that most or all states do not allow this is simply not true. If we are going to give information to people it should be correct and in my state I can do it.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Next time I won't write most states as it seems confusing to some to indicate all states...Do your own research for your own state. Just don't assume it's a blanket for all...You may be surprised...Don't think your HOA are up to date with your city or state laws. You will find a clause in their stating otherwise. They can NOT supercede any state, federal, or local laws...

Former HOA President

BradP (Kansas)
Posts: 2,640

Posted:

Quote:

Posted By MelissaP1 on 11/07/2012 7:04 AM
Next time I won't write most states as it seems confusing to some to indicate all states...Do your own research for your own state. Just don't assume it's a blanket for all...You may be surprised...Don't think your HOA are up to date with your city or state laws. You will find a clause in their stating otherwise. They can NOT supercede any state, federal, or local laws...

I am well aware they can't supercede laws...unless you have information to the contrary i will go by my research and the advice of our attorney

MelissaP1 (Alabama)
Posts: 13,836

Posted:

By the way...Here is your "Google arm chair lawyer search" results: (And NOT from an Alabama lawyer...)

Answers to Common HOA Assessment Lien Questions

by: Andrew D. Lynch
Lynch Law Firm, The, LLC - Scottsdale Office

October 21, 2009

What is an Assessment Lien?

An assessment lien is an automatic lien that attaches to a homeowner's property for the benefit of a homeowners' association (the "HOA") once any HOA member becomes delinquent on HOA assessments. An assessment lien allows the HOA to sell the homeowner's property to repay assessments owed to the HOA. The assessment lien also operates as a cloud on title, essentially prohibiting a homeowner from selling or refinancing the property that is subject to an assessment lien until the lien is satisfied.

How is an Assessment Lien Created?

In most cases, assessment liens are automatically created against a homeowner's property as soon as the homeowner becomes past due on assessments. To provide the public with notice of this assessment lien, HOAs commonly record a "Notice of Lien" or similarly titled document with the county recorder's office that describes the property subject to the assessment lien and the amount the HOA claims is owed.

Can my HOA Record an Assessment Lien Against my Home?

Nearly every HOA has the power to place assessment liens on properties owned by members who are past due in assessments. The Arizona Planned Community Act and Condominium Act grant such power to HOAs. So long as the HOA is a "Planned Community" or a "Condominium" it is afforded automatic assessment liens. Generally, the distinction between "Planned Community" and "Condominium" comes from how the common areas in the community are owned. In a condominium, the homeowners share equally in the ownership of the common areas. For example, each owner will own an undivided 1/100th interest in the common areas. In Planned Communities, the common area is owned by the HOA itself. A few HOAs are neither Planned Communities nor Condominiums; however, these HOAs may still have assessment lien rights arising out of the HOA's governing documents rather than from Arizona law.

Can my HOA Sell my Home?

Yes. An assessment lien is a lien placed upon an association member's home that may be judicially foreclosed, meaning the property may eventually be sold to satisfy the HOA's debt.

How Soon Can an HOA Sell my Home?

Assessment liens must be judicially foreclosed, which is a lengthy and expensive process whereby an HOA essentially asks a judge for permission to sell the homeowner's property. Unlike trustee sales, which are the most common method for homes to be "foreclosed" in Arizona, judicial foreclosure is a longer process that grants homeowners certain rights to redeem the property and repay the debt. An HOA can never sell a homeowner's property unless it first files a lawsuit against the homeowner seeking foreclosure of the assessment lien. Also, an HOA may not even begin a judicial foreclosure lawsuit until the homeowner is at least $1,200.00 or one year past due in assessments. An HOA lawsuit filed too early can be dismissed.

How Does an HOA Collect its Assessment Liens?

HOAs must file a lawsuit and receive a favorable judgment in order to foreclose an assessment lien. This process can be costly and time consuming for an HOA; therefore, HOAs often decide not to incur this expense. Instead, the HOA will merely record an assessment lien against the home with the county recorder's office and wait for the lien to be repaid. This recording puts the public on notice that this particular property is subject to an assessment lien. Properties subject to an assessment lien are almost never refinanced or sold until the lien is removed; therefore, HOAs sometimes record the lien and wait to be paid from the property's next transaction.

How Long is an Assessment Lien Valid?

Assessment liens are automatically extinguished if collection proceedings are not brought within three years. An HOA may still sue a homeowner for up to six years of unpaid assessments, which is Arizona's statute of limitations for breach of contract cases. However, the HOA will only have assessment lien rights for the preceding three years of unpaid assessments. If an HOA decides to sue a homeowner for six years worth of unpaid assessments, the HOA's assessment lien rights are still only valid for the preceding three years.

Are There any Defenses to an Assessment Lien?

Yes. Assessment liens are sometimes invalid. Some common defenses to an assessment lien foreclosure lawsuit include: improper accounting by the HOA, failure to follow Arizona's assessment lien foreclosure statutes and the improper recording of an assessment lien.

Arizona law is clear that assessment liens can only be imposed for past due assessments and late fees, collection fees, and attorney fees related to these past due assessments. HOA fines or other charges unrelated to assessments may not be included in the assessment lien. Furthermore, payments to an HOA must first be applied to assessments before any other type of debt. Accordingly, assessment liens can be invalid if the HOA misapplies payments to another category instead of assessments.

As discussed above, an assessment lien foreclosure lawsuit can only be filed if the homeowner is delinquent at least $1,200.00 in overdue assessments or at least one year past due. If an HOA begins its foreclosure lawsuit too soon, the lawsuit can be dismissed.

Furthermore, if an assessment lien is improperly recorded against a property, the property owner can bring a wrongful lien claim against the recording HOA. This wrongful lien claim, found in Arizona Revised Statute § 33-420, provides a minimum $5,000.00 in damages against a party for improperly recording a lien, plus an additional $1,000.00 if the recorder refuses to promptly release the assessment lien. Attorneys' fees and costs may also be awarded to the prevailing party in such a claim.

Again, there are numerous defenses to an assessment lien that can potentially invalidate it. Before paying off an assessment lien, or deciding to contest such a lien, a homeowner should consult with a licensed Arizona attorney experienced in such matters to discuss all legal options applicable to the specific circumstance.

How Can I Remove an Assessment Lien From my Home?

A homeowner has two general options to remove an assessment lien. First, the assessment lien, along with all late charges and collection costs associated with the assessment lien, can be repaid in full. Second, a homeowner can contest the validity of the assessment lien in court by raising any applicable defenses and/or bringing any appropriate counterclaims against the HOA. Before selecting either of these options, it is recommended that any homeowner with an assessment lien against their property consult with an Arizona attorney experienced in such matters to completely evaluate the homeowner's legal options. If the lien is invalid, a lawyer can often negotiate its removal or modification for you.

This article is not intended to be specific legal advice. It only provides general legal information. You should consult an Arizona licensed attorney if you have a legal issue. The attorneys at The Lynch Law Firm, L.L.C. are experienced in this area of law and are available for consultation.

Former HOA President

BradP (Kansas)
Posts: 2,640

Posted:

Quote:

Posted By MelissaP1 on 11/07/2012 7:53 AM
By the way...Here is your "Google arm chair lawyer search" results: (And NOT from an Alabama lawyer...)

Answers to Common HOA Assessment Lien Questions

by: Andrew D. Lynch
Lynch Law Firm, The, LLC - Scottsdale Office

October 21, 2009

What is an Assessment Lien?

An assessment lien is an automatic lien that attaches to a homeowner's property for the benefit of a homeowners' association (the "HOA") once any HOA member becomes delinquent on HOA assessments. An assessment lien allows the HOA to sell the homeowner's property to repay assessments owed to the HOA. The assessment lien also operates as a cloud on title, essentially prohibiting a homeowner from selling or refinancing the property that is subject to an assessment lien until the lien is satisfied.

How is an Assessment Lien Created?

In most cases, assessment liens are automatically created against a homeowner's property as soon as the homeowner becomes past due on assessments. To provide the public with notice of this assessment lien, HOAs commonly record a "Notice of Lien" or similarly titled document with the county recorder's office that describes the property subject to the assessment lien and the amount the HOA claims is owed.

Can my HOA Record an Assessment Lien Against my Home?

Nearly every HOA has the power to place assessment liens on properties owned by members who are past due in assessments. The Arizona Planned Community Act and Condominium Act grant such power to HOAs. So long as the HOA is a "Planned Community" or a "Condominium" it is afforded automatic assessment liens. Generally, the distinction between "Planned Community" and "Condominium" comes from how the common areas in the community are owned. In a condominium, the homeowners share equally in the ownership of the common areas. For example, each owner will own an undivided 1/100th interest in the common areas. In Planned Communities, the common area is owned by the HOA itself. A few HOAs are neither Planned Communities nor Condominiums; however, these HOAs may still have assessment lien rights arising out of the HOA's governing documents rather than from Arizona law.

Can my HOA Sell my Home?

Yes. An assessment lien is a lien placed upon an association member's home that may be judicially foreclosed, meaning the property may eventually be sold to satisfy the HOA's debt.

How Soon Can an HOA Sell my Home?

Assessment liens must be judicially foreclosed, which is a lengthy and expensive process whereby an HOA essentially asks a judge for permission to sell the homeowner's property. Unlike trustee sales, which are the most common method for homes to be "foreclosed" in Arizona, judicial foreclosure is a longer process that grants homeowners certain rights to redeem the property and repay the debt. An HOA can never sell a homeowner's property unless it first files a lawsuit against the homeowner seeking foreclosure of the assessment lien. Also, an HOA may not even begin a judicial foreclosure lawsuit until the homeowner is at least $1,200.00 or one year past due in assessments. An HOA lawsuit filed too early can be dismissed.

How Does an HOA Collect its Assessment Liens?

HOAs must file a lawsuit and receive a favorable judgment in order to foreclose an assessment lien. This process can be costly and time consuming for an HOA; therefore, HOAs often decide not to incur this expense. Instead, the HOA will merely record an assessment lien against the home with the county recorder's office and wait for the lien to be repaid. This recording puts the public on notice that this particular property is subject to an assessment lien. Properties subject to an assessment lien are almost never refinanced or sold until the lien is removed; therefore, HOAs sometimes record the lien and wait to be paid from the property's next transaction.

How Long is an Assessment Lien Valid?

Assessment liens are automatically extinguished if collection proceedings are not brought within three years. An HOA may still sue a homeowner for up to six years of unpaid assessments, which is Arizona's statute of limitations for breach of contract cases. However, the HOA will only have assessment lien rights for the preceding three years of unpaid assessments. If an HOA decides to sue a homeowner for six years worth of unpaid assessments, the HOA's assessment lien rights are still only valid for the preceding three years.

Are There any Defenses to an Assessment Lien?

Yes. Assessment liens are sometimes invalid. Some common defenses to an assessment lien foreclosure lawsuit include: improper accounting by the HOA, failure to follow Arizona's assessment lien foreclosure statutes and the improper recording of an assessment lien.

Arizona law is clear that assessment liens can only be imposed for past due assessments and late fees, collection fees, and attorney fees related to these past due assessments. HOA fines or other charges unrelated to assessments may not be included in the assessment lien. Furthermore, payments to an HOA must first be applied to assessments before any other type of debt. Accordingly, assessment liens can be invalid if the HOA misapplies payments to another category instead of assessments.

As discussed above, an assessment lien foreclosure lawsuit can only be filed if the homeowner is delinquent at least $1,200.00 in overdue assessments or at least one year past due. If an HOA begins its foreclosure lawsuit too soon, the lawsuit can be dismissed.

Furthermore, if an assessment lien is improperly recorded against a property, the property owner can bring a wrongful lien claim against the recording HOA. This wrongful lien claim, found in Arizona Revised Statute § 33-420, provides a minimum $5,000.00 in damages against a party for improperly recording a lien, plus an additional $1,000.00 if the recorder refuses to promptly release the assessment lien. Attorneys' fees and costs may also be awarded to the prevailing party in such a claim.

Again, there are numerous defenses to an assessment lien that can potentially invalidate it. Before paying off an assessment lien, or deciding to contest such a lien, a homeowner should consult with a licensed Arizona attorney experienced in such matters to discuss all legal options applicable to the specific circumstance.

How Can I Remove an Assessment Lien From my Home?

A homeowner has two general options to remove an assessment lien. First, the assessment lien, along with all late charges and collection costs associated with the assessment lien, can be repaid in full. Second, a homeowner can contest the validity of the assessment lien in court by raising any applicable defenses and/or bringing any appropriate counterclaims against the HOA. Before selecting either of these options, it is recommended that any homeowner with an assessment lien against their property consult with an Arizona attorney experienced in such matters to completely evaluate the homeowner's legal options. If the lien is invalid, a lawyer can often negotiate its removal or modification for you.

This article is not intended to be specific legal advice. It only provides general legal information. You should consult an Arizona licensed attorney if you have a legal issue. The attorneys at The Lynch Law Firm, L.L.C. are experienced in this area of law and are available for consultation.

yeah, that is a scottsdale, AZ attorney, not applicable to Kansas

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Of course it is...It's not Kansas...Just can't possibly be true now can it? Sounds like someone's HOA has some liens out there based on fines that will really ruin their day if they have to drop them...Just sayin...

Former HOA President

BradP (Kansas)
Posts: 2,640

Posted:

Quote:

Posted By MelissaP1 on 11/07/2012 8:08 AM
Of course it is...It's not Kansas...Just can't possibly be true now can it? Sounds like someone's HOA has some liens out there based on fines that will really ruin their day if they have to drop them...Just sayin...

We actually don't...time to stop this madness, I am done with this thread.

BradP (Kansas)
Posts: 2,640

Posted:

So I lied and dug really deep and here is what I found in the state of Kansas...

Chapter 58, Article 22...states that if you file a lien in the Registars office on a person's property without having them sign a consent form that the lien is not valid after 30 days. However, it specifically excludes HOA dues and assessments and refers to the wording in the filed declarations. Based on that statement and on our filed declarations I feel in the state of Kansas you can lien for fines.

Furthermore, i won't blanket statement most states but several do have provisions for a judgement lien. Meaning all you would have to do is go to small claims court, prove they broke the rules and fines you imposed were just and if you get a judgement you are allowed to lien the property based on that.

And Finally, I will only speak to my state but several have Mechanics liens. If as an HOA you have to go onto a property to fix something you may have a right to a mechanics lien. The caveat in my state is the owner has to sign something prior to work stating they are aware of this provision. However, I could and will argue that since the CC&R's give us the approval to go onto the property and fix it and bill it and also give us the ability to fine and lien that it could be considered blanket approval. That is a stretch but maybe not a big one if you worded your covenants differently.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

I take some of words back and did look into Kansas law on the subject. It does allow for fines but as you stated there is an entire process one must go through. That includes going to small claims court. Which in my opinion is just doubling the work load on a fine versus the unpaid assessment route. It's just not very profitable and just keeps a bleeding wound open.

Did I not mention the mechanics lien part in my long winded responses? LOL! Yes, the HOA can enter your property for repair/maintenance purposes and send you the bill. It would not be considered the "Assessment lien". I had a con-man (Ex-President) in my HOA who tried this approach. He wanted me to serve people notices of violations and then have the HOA pay him directly to do the repairs. That way he could charge the HOA any amount he wanted because the HOA would have been "guaranteed" to have recourse of getting the money back from the owner through a lien. You can imagine my response...It didn't happen but did use him to get the HOA fixed up...Just NOT through the HOA dime...

Being aware of the different types of liens is important. There are even "Super liens" in some states like Alabama that puts the lien on the same level of the bank. So if the bank is foreclosing on the property the HOA doesn't just get the leftovers. They are on equal footing of the bank. An important thing to know when deciding on what type of lien to use.

Former HOA President

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Can we agree it varies form state to state?

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