As a HOA board member, would you rather an investor to pay off the HOAs lien and don't have to worry about the accumulation of interest, late fee & ot

Mai,

Most states have chosen to make mortgage liens superior to HOA liens. If that were not the case, lenders would be reluctant to write mortgages for HOA or condo properties. In the long run, allowing the associations to have a superior lien may limit sales to those who can pay cash.

To answer the question, no. It truly hasn't been worth it in our HOA. What happens is that the Certificate of Title is sold at auction to satisfy the lien. UNLESS nobody bids. Then the HOA ends up with the Certificate of Title. HOAs should not be in the business to be landlords. And if someone does bid to satisfy the lien, what you will likely end up with is an "investor" who will then rent out the property until the bank forecloses. These have not typically been the sort of people who are in it for the long haul. Their goal is to get as much money as they can (their "investment" back and then as much as they can milk it for after that). Since these "investors" are not really "vested" into the property, they are not always going to care about the maintenance or the quality of renter or the enforcement of the restrictions. Then, if you are the homeowner who is living next to the HOA foreclosure, it isn't exactly driving up your property values. The "quality of life" in the neighborhood did not improve with the HOA foreclosing on liens.

The best things our HOA ever did to collect was to offer "amnesty" to homeowners who were willing to pay in full and waive the late fees and interest to sweeten the deal. We ended up with a few people who took advantage of it. My advice is if your Association is willing to reach out and offer to work with delinquent homeowners, you might end up with better results.

Tim, thank you for the link. That explained a lot.


The law limits their ability to foreclose, not their liabilty.

The statute limits associations to foreclosing only for unpaid assessments. Fines can no longer be the basis for foreclosure. (There are a number of other states with similar states, including my own.) The law also limits the amount that an attorney may charge for his services to the amount of the unpaid assessments. It will be difficult in the future for associations to forclose for small amounts because attorneys will not be able to recover enough fees. You are correct, this is not good news for associations.


Tim's link also discussed another statute and I think you may be confused as to which goes with what.

There is apparently now a new MD statute that addresses refinancing first mortgages. In the past, when a person refinanced a first mortgage, a second mortgage lender could claim that his lien was superior because it predated the refinance of the first mortgage. This has nothing to do with association liens.

There is also a new statute that permits the buyer of a property to non-judicially evict squatters if it appears that they have abandoned the property. Otherwise, the new owner must evict the squatters with a court action. Again, this does not pertain to associations and does not authorize non-judicial foreclosures.

Firstly, thanks so much for overwhelming advice and thoughts. Greatly appreciate you guys' inputs.

Lastly, just to pick up on Kelly's point, should the investor then be better off approaching HOA's Board of Directors first and convince them of the collaboration on the business opportunity OR should the investors approach the law firm that takes care of the lien??? Advices and/or thoughts on the pros and cons of each?

Well said.

My reaction is no way an association should be playing real estate investor. As a member it is my money they are playing with thus they will be held to a very tight standard.