HOA lien on your house? Here are your options

Nearly one out of every three homeowners live with a homeowner’s association (HOA) today, and that number is going up every year as 60% of new single-family homes fall within the bounds of these planned communities.

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HOAs can offer numerous benefits like better infrastructure and freedom from eyesores, but they can come with drawbacks too. These organizations can wield a lot of power, and the way they work can vary a lot between states and even individual neighborhoods. That can make it tough to know your options if you have an HOA lien and foreclosure on your house, but there are ways to fix it.

What is an HOA lien?

If you buy a house in a planned community, it’ll typically be governed by an HOA that was set up and registered as a corporation by the developer who built all of the homes. HOAs are created to offer more neighborhood services like pools and parks, and ensure everyone in the community adheres to certain standards.

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Each HOA is governed by board members elected from among your neighbors, although many HOAs hire management companies to help with the day-to-day operations. HOAs typically collect regular HOA fees and special assessments to pay for these services. If you run afoul of the rules, your HOA may also assess fines.

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HOAs have a lot of power as outlined by each group’s bylaws and Covenants, Conditions, and Restrictions (CC&Rs), the legal documents you agreed to when you purchased your home. These rules — and what the HOA does when you break them or fail to pay your HOA fees — can vary a lot between groups. Further complicating matters, the lengths your HOA can go to varies in a patchlike manner across the country depending on what state you live in.

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However, in each state, your HOA can put a lien on your property if you have unpaid dues or violations. An HOA lien can make it difficult or impossible to sell your home, gain access to credit, and it can set in motion a series of events that even results in an HOA foreclosure of your home.

Can an HOA put a lien on your house?

The short answer is yes. An HOA lien is a type of statutory lien, meaning it gives your HOA property rights to your home automatically — as soon as you’re overdue on your HOA fees — without even filing a lien. Some states still require HOAs to record a lien with your county land records office to make it a matter of public record, while some don’t. Depending on the terms in your CC&Rs, your HOA may also put a lien on your house if you’re not in compliance with your community’s rules.

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The CC&Rs for your HOA outline the exact steps they’ll take next. They may send you an overdue payment or lien notice, try to call you, limit your access to community property, or hire debt collectors. Your HOA may also levy additional fees, interest, and attorney charges to your outstanding bill, causing it to increase beyond your actual unpaid dues.  

What happens if you don't pay an HOA lien?

An HOA lien can wreak havoc in many ways, including:

• Adding increased stress in your life.
• Straining your relationship with your neighbors.
• Making it more difficult or impossible to sell your home.
• Reducing your ability to borrow against your home equity.
• Requiring contact with debt collectors, lawyers, and court officials.
• Increasing your costs via added attorney’s fees, interest, and other penalties.
• Having your wages or bank account garnished if a judge rules against you in court.
• Harming your credit score and making it tougher to get approved for credit or subsequent housing.

Can an HOA foreclose on your home?

If you don’t pay your outstanding balance, your HOA can also pursue foreclosure on your home. Some states have time and monetary limits governing when HOAs can do this, but not all. In California, for example, your HOA can’t foreclose on you unless you’ve been overdue for at least a year or have more than $1,800 in unpaid HOA fees. Texas, on the other hand, has no such laws, allowing HOAs to foreclose on homes for any unpaid dues, however small.

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Depending on state laws, your HOA may be required to file a lawsuit and obtain a judgment lien before foreclosing on your home. In many states, HOAs are allowed to proceed with non-judicial foreclosures, allowing them to sell your home at auction without going through the courts first.

Preventing HOA liens

The simplest thing you can do to prevent an HOA lien is to stay up-to-date on your HOA or condo dues and stay in compliance with your community rules. Putting your HOA payments on autopay is an easy way to avoid forgetting this important task.

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However, sometimes we fall behind on finances and if a property owner fails to pay unpaid assessments, it’s not always their direct fault. If you find yourself in these shoes, it’s important to keep an open line of communication with your HOA, as uncomfortable as it may be at first.

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Your HOA may be able to offer assistance, such as setting up an interest-free payment plan for delinquent assessments, which may be able to help stave off additional attorney’s fees and charges from your balance. Make sure you keep copies of any correspondence in writing in case you need to refer to it later.

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Other options to get current on delinquent payments could include things like:

• Personal loans: Personal loans provide a lump sum of cash that borrowers can repay over time with fixed monthly payments and interest.
• Selling personal property: Selling personal property can help you generate cash quickly by parting with items of value, like electronics, vehicles, or jewelry. This approach can be a fast way to raise funds without taking on new debt.
• Home equity loans and HELOCs: Home equity loans and HELOCs allow homeowners to borrow against their home’s equity, with home equity loans offering a lump sum and HELOCs providing a revolving line of credit. Both options typically have lower interest rates than personal loans due to their secured nature.
• Home equity investments: Home equity investments provide homeowners with cash in exchange for a portion of their home’s future appreciation. There are no monthly payments over a flexible 30-year term. No income requirements exist, and homeowners can qualify with a credit score as low as 500.
• Borrowing from friends and family: Borrowing from friends and family can be an interest-free or low-interest way to pay hoa dues or fines, depending on the arrangement. This option requires open communication to avoid misunderstandings and maintain good relationships.

It’s also a good idea to consult the bylaws and CC&Rs for your HOA, which will outline the exact procedures and timelines you can expect various actions to be taken. Check to see if your state has HOA foreclosure laws in place as well, which may limit their power to evict you and sell your home.

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You may need to consult a real estate attorney if you’re unable to reach a resolution with your HOA. This can be especially important given the nuances of state laws governing HOAs, and because many HOAs also take legal action and hire attorneys to pursue homeowners for unpaid dues. If you can’t afford a lawyer, there are many options for free legal assistance, affordable credit counseling, and other community resources that you can find help locating through 211.org.

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Final thoughts

Dealing with an HOA lien can be scary, but you have many more options available to you than you might think. Once you’ve cleared up the amount due, make sure to request a Lien Release form from your HOA as future proof that the situation has been resolved. Finally, if you have the bandwidth, you can also consider joining the board of your HOA to change the rules from within or even to dissolve the organization if you can get enough neighbors on board.