What is the lien process for HOAs?
What Is an HOA Lien?
An HOA lien is a claim against a property, the claim consists of HOA fees or dues. When an owner does not keep up with their payments and falls behind, the HOA has the ability and right to place an HOA lien against your home. This means that the owner will not be able to refinance or sell their home until the balance is paid in full.
Specific examples of HOA liens being placed on properties or individuals:
Missed Payments: If a homeowner fails to pay their HOA fees, the HOA may place a lien on the property. For example, if a homeowner is behind on their dues for several months, the HOA may take legal action to place a lien on the property until the debt is settled.
Violation Fines: Homeowners who violate HOA rules or regulations may be fined by the HOA. If these fines are not paid, the HOA may place a lien on the property. For instance, if a homeowner repeatedly violates noise restrictions and fails to pay the resulting fines, the HOA may take action to place a lien on the property.
Failure to Maintain Property: HOAs often have rules regarding the maintenance and upkeep of properties within the community. If a homeowner fails to maintain their property according to these rules, the HOA may issue fines or place a lien on the property. For example, if a homeowner neglects to mow their lawn or keep their property in good repair, the HOA may take action to place a lien on the property until the issues are addressed.
Unpaid Special Assessments: In addition to regular HOA fees, homeowners may be required to pay special assessments for major repairs or improvements to the community.
What Happens if I Don’t Pay the Lien?
if the owner fails to pay the HOA lien, the HOA could eventually foreclose on the property. This is generally the worst case scenario but you want to avoid this at all cost. If you are having trouble paying your dues, reach out to the HOA and be transparent about your situation, they often will be more aggressive if you are not paying your dues without giving any reasoning.
How long do HOA liens last?
Depending on the state it varies, for example in the State of Oregon, “Homeowner associations in Oregon are governed by the Planned Community Act, ORS Chapter 94. Under that statute, homeowner associations have an “automatic” lien on any lot that is delinquent on assessments or dues. The automatic lien exists without filing or recording a traditional paper lien in the county records.” With that being said, in the event that the HOA forecloses on its lien, then a traditional lien is filled and recorded.
How long does the HOA have to foreclose on its lien? Under Oregon law (ORS 94.709) the HOA lien is valid for six years. This is also consistent with the statute of limitations regarding breach of contract which is also usually six years. ORS 12.080(1): “An action on certain contracts or liabilities must be commenced within six years.”
Oregon HOAs have six years to try to collect delinquent assessments. This applies to collecting the assessment through foreclosure or through a lawsuit against the property owner. Once a delinquent assessment is more than six years old, the association will be prohibited from collecting the delinquent assessment under the statute of limitations.
How Much Will an HOA Foreclosure Hurt My Credit Score?
The HOA might not report your delinquent payments to the credit bureaus. However, if the HOA sends the debt to a collection agency to try to collect from you, the debt collector might report it.
And if an HOA forecloses, the action will probably show up in your credit history even if the HOA doesn’t report it.
A foreclosure will likely reduce your FICO score by at least 100 points. The number of points the score will drop varies from person to person.
The drop would be more severe if you had a very high credit score before the foreclosure. But if your credit score is already pretty low, the foreclosure will have less impact. Missed HOA payments can also lower your score if the HOA reports them to the credit reporting bureaus.
What can I do after an HOA lien is filled?
After an HOA (Homeowners Association) lien is filed, there are several actions that can typically follow, depending on the circumstances and the specific rules of the HOA and state laws:
Payment of the Debt: The homeowner can choose to pay the debt owed to the HOA, including any fees, fines, or assessments that led to the lien being filed. Once the debt is paid, the lien is typically released.
Negotiation: Homeowners can try to negotiate with the HOA to settle the debt, potentially through a payment plan or a reduced settlement amount.
Legal Action: If the homeowner believes the lien was filed in error or if there are legal issues with the lien, they can take legal action to challenge the lien.
Foreclosure: In some cases, if the debt is not paid, the HOA may move forward with foreclosure proceedings. This could result in the sale of the property to pay off the debt.
Sale or Refinance: If the homeowner wants to sell or refinance the property, the lien will typically need to be satisfied before the sale or refinance can proceed.
It’s important for homeowners to understand their rights and obligations under the HOA’s rules and state laws, and to seek legal advice if they have questions or concerns about an HOA lien.
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