Have you noticed that some of your HOA residents don't pay their fees or are consistently making late payments? There's a good chance that your community association is racking up debt if this is happening.
Residents who don't pay their HOA dues are subject to consequences, such as HOA liens.
What is an HOA lien exactly? Keep reading to find out.
What Is an HOA Lien?
An HOA lien is a claim against a property when a homeowner has unpaid HOA fees. If an owner falls behind on what they owe, the HOA can legally place a lien on the home.
An owner cannot sell their own or refinance it when there is a lien on it. The outstanding balance must be paid in full to remove the lien from the property.
An association property management company will try to collect debt using traditional methods before placing a lien on the home and eventually foreclosing it.
If calling and sending letters don't work, HOAs will take more drastic actions to collect debt. In addition to placing an HOA lien, they could take away communal facility privileges or file a money judgment lawsuit.
If you have trouble paying your dues, get in touch with an association manager to discuss possible payment options.
The best way to avoid an HOA lien is to pay the fees on time. If you openly communicate in advance that you are facing financial struggles, you might be able to keep your home safe and work out a payment plan.
What Happens if You Don't Pay the HOA Lien?
HOA communities are built on homeowner dues. If a homeowner fails to pay the HOA lien, the HOA can foreclose on the property.
Foreclosed properties are the worst-case scenario as they can lead to the loss of a home and can cause the owner's credit score to go down.
Judicial and non-judicial foreclosures are the two types to know about.
Judicial vs. Non-Judicial Foreclosure
Judicial foreclosure refers to a judgment from a court giving the HOA permission to sell the home to satisfy the lien. In Kentucky, foreclosures go through a judicial process.
States that allow non-judicial foreclosures can record a property lien and hold foreclosure sales without a court order.
After the HOA forecloses on the property, liens are removed from the property title, and the HOA board can sell the home to fulfill the debt.
HOAs are not responsible for paying off the mortgage on a foreclosed home. This is still the responsibility of the owner who signed the promissory note.
How Can Community Association Management Help?
Being part of an HOA board might mean making uncomfortable community decisions, such as placing an HOA lien on a home. HOA communities can work with community association management to make things easier.
A reputable association manager can collect dues, demand late payments, and file a lawsuit to get owed debt on behalf of an HOA board.
PMI Louisville is dedicated to making your community better. With more than 20 years of industry experience in Kentucky, we can handle various HOA responsibilities. Contact us today to get started.
