Lien on Condo

Whitney, we're not lawyers and we don't give legal advice and neither do realtors nor brokers. And legal advice is what you need, if you can't afford to hire an attorney, check with the local Bar Association or if there is a law college nearby they often have students do supervised pro bono work for the experience.

But generally speaking if the trustee sale doesn't generate enough money to satisfy the mortgage and the lien, then the lien would remain in effect and collectible. The lien would remain in effect until it is satisfied, discharged by bankruptcy or until it expires in three to five years (check local laws) at which time the HOA could renew it. Would they go to this effort? It's doubtful they would but as a valid debt it can also be turned over to collection agents.

Glen - I, too, am not an attorney (e.g. be "wary" of any legal statements I might make) but I think you've "over extended" the functionality of the lien. The lien is placed on the property not the owner. Therefore what you say about the proceeds of the trustee sale is true, BUT, if the amount collected is not enough to satisfy the HOA's lien, that doesn't automatically transfer to anything, including the owner.

Now, it is true that many CCRs make the payment of dues/assessments a personal obligation of the owners. In that case, once the lien on the property cannot be satisfied by the sale of the property, it will be up to the HOA to then attempt collection in a normal business manner. However those collection efforts will not involve a property lien since that "horse is already out of the barn" with the sale of the property.

The overall effect is really the same, I thought it wise to clarify the distinction of the lien from other collection efforts.

Glen,

I think you may have misstated the general rule and I agree with JohnO's comments.

As a generality, amounts owed to condo association or HOA's are both personal debts and for lack of a better term, property debts. That is, if the debt is unpaid, the association can file a lawsuit to collect the money (i.e., go after the person) or file a lien (i.e., go after the property). Taking one action doesn't preclude the association from pursuing both remedies, although it cannot collect twice. Check the docs and state law.

So, to answer Whitney's question, if the trustees foreclose, the proceeds from the trustee's sale will generally go to pay off the deed of trust (and attorney's fees), and then junior lien holders, in order of priority. The foreclosure sale will wipe out any junior liens such as that of the condo association. If the lender is the only bidder, they will bid up to the amount owed them. If someone else buys the property at the foreclosure sale, they will outbid the lender and presumably there will be enough to pay some if not all of the junior lien holders.

Typically, the lender is the high bidder at the foreclosure sale. In that case, while the lien of the condo association is extinguished by the foreclosure sale, the personal obligation to pay those fees remains outstanding. Whitney's husband (and Whitney, if she is co-owner of the property) are personally liable for that debt and can be sued for that debt until he/they file for bankruptcy or the statute of limitations expires.

It is my understanding that, in a few states, condo associations and HOA's can collect unpaid assessments from subsequent buyers even after a foreclosure sale. That isn't true in Maryland, nor is it true in Ohio (although there is a bill pending in Ohio - SB182 - that would change the current law and give Ohio associations a "super lien"). I don't know if California (or the state where the condo is located, if different) has a super lien law in force - if so, that might assist Whitney's husband since it is probably easier for the condo association to collect from the subsequent buyer than to file a lawsuit against her husband for the personal debt.

JohnB, there is another option open to Whitney and her husband besides paying the bills or filing for bankruptcy - trying to negotiate a settlement with the condo association. If the condo is out of state, if there is no equity, if bankruptcy is a real option, and possibly other factors, the condo association just might agree to take a lesser amount. Sometimes, it is better to recognize that it is better to get something, rather than nothing. In most cases, there is little incentive for the association to accept less than the full amount, but this could be one of those rare cases.

SusanW, yes, it does matter when the lien was filed. If the condo lien was filed before the lender's lien (or if the state has a super lien law in force), it would be superior to the lender's lien and would not be extinguished by a foreclosure - any subsequent buyer would take the property subject to the lien. (It would be highly unusual for the condo lien to be filed first, perhaps only in the case of a private mortgage where the lender did not bother to check for existing liens, or where the closing attorney committed malpractice and missed the filing of the superior lien).

Mary,

Agreed. A lien that is filed first in time can be subordinated to a later lien. The clause you referred to is a built-in subordination clause and if included in the covenants changes the order of priority of liens (generally, first to file is first in right), unless that state has a super lien law.

As you say, bottom line is to check CCRs and state laws.

Think of it like this....

If your condo is foreclosed on, and you still owe the telephone bill or water bill, do you think you don't owe them anymore?

Of course you owe them. Will the companies go after you? Maybe, maybe not.

Same with associations. Its very possible they will sue you in small claims court to recover the fees. In a case like that, the person could declare bankruptcy to avoid the association fees, but its unlikely. When the association wins, you gotta pay. The judge could even order a garnishment of your wages if you continue to refuse to pay.

Our association uses small claims court to collect unpaid dues, 100% success rate so far.

thank you everyone for your input. I did not know this was not legal advice I googled free legal advice and this was one of the top websites that came up. It is not that we do not want to keep the condo we have tried we tried to get renters but unfortunately with the decrease in property value in CA the price of our mortgage and the comparison of rental properties in the area is a huge deference. We tried a short sale but the 2nd will not cooperate. The HOA is raising the monthly fees again. The HOA company we has before this one embezled money and ran so we all pitched in money to pay off the debt. My husband lost his manditory Overtime that he had at his job. and I was laid off of my job. we've also tried a modification but it wont be processed before the trustee sale. so thanks for your input i'll call the HOA and see if we can set up some kind of payment.

What a wonderfully "veiled" political statement...which does NOT belong here...