Did You Know Your Homeowner’s Association Can Foreclose On Your House Even if You’re Paying Your Mortgage?

Did you know your HOA has scary debt collection options?
Image Source: Flickr User Miek McCune

It seems like as long as you pay your mortgage lender every month, you should never have to worry about losing your home. But if your neighborhood or condo building has a homeowner’s association and you fail to pay their monthly dues or HOA fees, you can be foreclosed on even if your mortgage is in good standing. Here’s what you need to know!

Your HOA can charge more than just dues

In addition to either monthly or annual dues that cover upkeep on common areas and access to facilities such as a pool, clubhouse, or other amenities, HOAs have discretion to charge other fees for infractions of rules or to meet special financial demands, depending on the charter.

For instance, if the tennis courts in your neighborhood are damaged and the fund does not have enough to cover repairs or refacing the facility, the HOA may set up a special assessment to meet this need. If you don’t pay this on top of your usual monthly dues, you can face trouble.

Also, if you break HOA rules like leaving your trash can at the curb past pick up day, not mowing your lawn, skipping weed killer, or leaving a noticeable repair unmade, you can get slapped with a fine if you ignore the warning letters. 

How your HOA can collect

The first tool in any debt collectors’ arsenal is letters and phone calls. From there, many HOA agreements give the HOA the ability to file a lien without taking you to court for a judgment first – that’s a unique power among debt collectors (and is a bit scary).

After your debt to the HOA becomes past due, they can file a lien with the county clerk’s office that will be registered against your property. You can be hit with a lien for unpaid HOA dues, fines for offenses, late fees of $20 (or 10% of the fine) per month, interest (up to 18% APR), legal fees, collections, costs, etc.

If the HOA intends to file a lien, they must give you 15 days written notice and must alert you that they intend to include attorney’s fees as well. If you pay within 15 days of receiving the letter, you can avoid attorney’s fees and may be able to negotiate a payment plan.

How your HOA can foreclose on you

If you don’t pay up on an HOA lien within 90 days of inception, the HOA can request that your property be foreclosed – even if your mortgage payments are current. They must notify you in writing before starting foreclosure procedures.

If the amount you owe the HOA is not dues but strictly unpaid fines, the HOA must file a lawsuit to start the foreclosure process. If the amount owed is for late HOA dues, they can skip the lawsuit phase and move straight to foreclosure on your property.

There is a statute of limitations on HOA liens. From the date the lien is filed, the HOA has three years to deal with the lien – either by getting you to pay up or by foreclosing on you. After the three year limit, the lien is evacuated.

How you can stop an HOA lien foreclosure

Either chapter of consumer bankruptcy – Chapter 7 or Chapter 13 – can generally put a stop to most foreclosures, repossessions, and debt collection lawsuits. With Chapter 7, the debt to the HOA can be eliminated, but new debt from the HOA including unpaid dues and fines may begin accruing again after the day of filing.

In other words, you can get rid of old HOA debt with Chapter 7, but if you keep the property, your future obligations as an HOA member will not be covered by the bankruptcy – only the old amounts. With Chapter 13 bankruptcy, you can get on a repayment plan for past due association fees and can wipe out some unsecured debts as well.

If you have been slapped with threatening letters from your HOA board regarding foreclosure action, you should speak to a reputable North Carolina attorney. If the HOA disputes are not your only financial problem, a bankruptcy attorney may be able to help you. If it’s just the HOA, a general attorney or real estate attorney may be the best bet.

Most attorneys offer a free initial consultation to discuss your problem – take advantage of that to get advice about your circumstances. In North Carolina, contact the Law Offices of John T. Orcutt for a free NC bankruptcy consultation. Call +1-833-627-0115 for an appointment at one of our offices in Raleigh, Durham, Fayetteville, Wilson, Greensboro or Wilmington.

Resources:

North Carolina Planned Community Act (N.C. Gen. Stat. §§ 47F-1-101 through 47F-3-122

North Carolina Condominium Act (N.C. Gen. Stat. §§ 47C-1-101 through 47C-4-120)