Unpaid Assessments; Check Your State Laws

To All,

I learned something the other day and I thought I would pass it along. As far as I know, the information below only applies to HOAs in Connecticut, but you may still want to check the laws in your state.

I was discussing forclosures with an attorney (he is working on a case for a client) and he happened to tell me that according to HOA law in Connecticut, HOAs and Condo Associations have a statutory lien for assessments that is prior to all other liens (including the bank's or mortgage company's), except for real estate taxes and other governmental liens. The law also gives the association the right to foreclose on the property in the same manner as a mortgage if the assesments remain unpaid. (There is a two-year statute of limitations to begin foreclosure proceedings, however). Surprised at hearing this, I checked the law and sure enough, there it was, as plain as day.

Knowing that banks would not be happy with this arrangement I did some additional checking and learned that when a person obtains a mortgage for a home in a condo or an HOA in CT, there is a mortgage rider that is attached that contains the following provision:

"If Borrower does not pay condominium dues and assessments when due, then Lender may pay them. Any amounts disbursed by Lender under this paragraph shall become additional debt of the Borrower secured by the Security Instrument. Unless Borrower and Lender agree to other terms of payment, these amounts shall bear interest from the date of disbursement at the Note rate and shall be payable, with interest, upon notice from Lender to Borrower requesting payment."

I often read in this forum, and in the news, about HOAs running short of funds with numbers of homeowners falling behind on assessments. It would appear that, at least here in CT, this should be less of an issue.

I don't expect that a large number of states have enacted similar laws, but I'm passing this information along because you just may want to check.

Bruce,

AZ law also gives HOAs an automatic assessment lien which cannot be foreclosed until the owner is delinquent for a period of 1 year or in the amount of $1,000 whichever comes first. Only diff is that ours is NOT prior to mortgages.

The rider you mention has become very common on all new mortgages. I've been told that although it appears it can be used whenever borrower doesn't pay his HOA assessments it is really only meant to be used if the lender forecloses. I haven't heard of one case where it's actually been used for delinquencies occurring w/o foreclosure. Otherwise, YES, it would appear to be a very easy way for assn's to literally wipe out their delinquencies.

That's because one of the leading proponents and original drafters of UCIOA was a prominent Connecticut condo attorney.

Joe

Bruce & Joe,

AZ has NOT adopted the UCIOA, as has CT.

Bruce,

I wish we had the same law in Florida but....our docs clearly state the association liens come aftr the mortgage company. There is, hoever, discussion in the legislature that if banks take back a home through foreclosure that they must pay assessments. Hope this passes but Florida is backward compared to your state.