A lien in a homeowners association can make selling or refinancing a home more difficult. It can even lead to foreclosure. To avoid liens, homeowners must fulfill their obligation to pay dues and know how liens work in the first place.
What is a Lien in Homeowners Association?
A lien is a legal claim attached to a property to secure a debt or obligation. In an HOA setting, liens are a consequence of nonpayment of dues or assessments. Homeowners association liens allow the HOA to place a hold on a property and even subsequently foreclose on it.
When a homeowner first buys a home or unit in an association, they agree to abide by the community’s rules and fulfill certain obligations. One of these obligations is to pay dues and assessments. If they default on these dues, they can face a series of escalating penalties, including liens and foreclosure.
How Does an HOA Lien Work?
A lien on an HOA house isn’t usually the first thing a homeowner faces after failing to pay dues. Typically, association boards impose late fees, suspend privileges, or take legal action first. Some even refer delinquent accounts to a collection agency.
If none of those collection strategies work, HOAs resort to placing a lien on the home. For some associations, liens automatically attach after a delinquency reaches a certain point. Others must record the lien following a strict procedure.
The lien serves as a warning of a more severe consequence: foreclosure. When a homeowner is notified of a lien, they must satisfy their debt with the association. Otherwise, the HOA board can initiate foreclosure proceedings.
Can an HOA Put a Lien on Your House?
The authority to place a homeowners association lien on a property relies on two things: state laws and the governing documents. Some states give associations the power, by law, to file liens as a result of delinquency.
In Texas, HOAs don’t have the inherent right to attach a lien to a unit or home. Instead, associations get this authority from their governing documents. The CC&Rs or bylaws must expressly state that the association can place liens for nonpayment of dues or assessments.
Texas Requirements for Lien in Homeowners Association
Texas law does not give HOAs the authority to place liens. This authority must come from the association’s governing documents. Additionally, these documents must define what types of debts may constitute a lien.
That said, Texas law does have some notice requirements before an HOA may file a lien. According to Section 209.0094, associations must provide two notices before recording a lien.
The HOA must send the first notice via first-class mail or email. Then, 30 days after the first notice, the HOA must send the second notice via certified mail.
Associations can file a lien with the county only after 90 days have passed after the second notice. This gives the homeowner enough time to settle their outstanding payment to avoid the lien.
Can an HOA Put a Lien on Your House for Violations?
It is possible for an HOA to place a lien as a result of unpaid violation fines. That said, some states explicitly prohibit liens that consist solely of fines. Instead, it must be a combination of fines and assessments.
In Texas, associations must refer to their governing documents. The CC&Rs and bylaws must explicitly spell out what types of debts a lien can secure, including fines, and whether or not fines can solely constitute a lien.
How HOA Liens Affect Credit Score
Homeowners may feel like their credit scores are safe from the effects of unpaid dues or assessments. While most HOAs don’t bother to report such debts to credit bureaus, a lien can certainly change things.
Liens are a matter of public record. This means credit bureaus can simply look up any liens against a person and use that to calculate their credit score. With this in mind, yes, liens can certainly have a negative impact on credit scores.
Additionally, HOAs can hire collection agencies to settle delinquent accounts. As part of their collection strategy, these agencies may also report these debts to a credit bureau on behalf of the association.
Can an HOA Take Your House?
Yes, following lien recordation and proper notice, an HOA can foreclose on a member’s home. This means that homeowners stand to lose their houses if they fail to meet their financial obligations to the association.
HOA lien foreclosure comes in two forms: judicial and nonjudicial. Let’s break these down below.
Judicial Foreclosure
Judicial foreclosure requires the HOA to file a lawsuit against the delinquent owner in a district or county court. If the court rules in the association’s favor, a sheriff or constable will seize the home and sell it at an auction. Proceeds from the sale can then be used to cover unpaid dues, assessments, fines, and legal fees.
The judicial process is lengthy and expensive, often taking several months or more than a year to complete. Because of this, most HOAs prefer the nonjudicial option.
Nonjudicial Foreclosure
Nonjudicial foreclosure doesn’t require a lawsuit, making it a speedier process. That said, not all HOAs have the ability to foreclose nonjudicially. An HOA’s governing documents must expressly authorize it.
In nonjudicial foreclosure, a representative or trustee appointed by the HOA will sell the home at a public auction. The court does not have to give an order or oversee the auction. Still, the association must still obtain an expedited court order, with the exception being if the owner provides a written waiver.
For Condo Associations
According to Section 82.113, condo associations in Texas have the inherent authority to use nonjudicial means to foreclose on a home. Again, this only applies to condominiums, not other forms of associations.
Lien in HOA: A Real Consequence
Navigating a lien in a homeowners association can come as a challenge to both homeowners and board members. When in doubt, it is best to seek professional help from a lawyer or management company. This makes sure that an HOA’s actions are well within its authority.
PAMco offers exceptional HOA management services to communities in Central Texas. Call us today at 512-918-8100 or contact us online to learn more!
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