How to Sell a House with HOA Liens
There are so many moving parts to selling your home: hiring a great local real estate agent, cleaning, repairing, and updating your home, saying goodbye to your neighbors – the list goes on and on. Every step toward a sale is important, there is an element that few homeowners consider when they’re ready to sell: their relationship with their HOA.
A homeowner’s association is there to ensure that your neighborhood, including any private parks, look their best. HOAs often utilize the dues, also called assessments, paid by residents to finance lawn and gardening services for the community. These fees may also go to improving community property, monthly utility bills and maintenance for a club house, neighborhood events, or private security. If you have a community pool, you can expect that at least a portion of your HOA dues will be used to care for it. HOAs can also provide valuable resources, like contractor referrals, and helping you to connect with your neighbors. Your HOA also exists to hear and act on concerns voiced by you, or your neighbors. From noisy neighbors to suspicious people in the area, your HOA is a service that requires your monthly dues to positively affect the wellness of the community. Without receiving everyone’s dues on time every month, the relationship between you and your HOA will become more difficult to manage.
What Can My HOA Do?
Before buying a home, you should collect all of the information about the HOA that you can. Many people don’t know that their HOA has the power to put a lien on their house. That’s right: your HOA can legally place a lien on your home if you don’t pay your dues. This means that you’re legally obligated to pay your HOA dues when they’re due. What’s worse (for any homeowner who lives in a community with an HOA) is that a lien on your home, whether it comes from the bank, or from your HOA, can negatively affect your ability to sell your home, and your credit.
Understand that your HOA could have the power and the ability to file a lien against your property for unpaid dues. Every HOA doesn’t have the power to put a lien on your home. It must be clearly stated in the HOA’s laws, called the Declaration of Covenants, Conditions, and Restrictions, or CC&Rs. Some states forbid HOAs from taking certain actions against homeowners who haven’t paid their dues. Other states have mandated that homeowners receive notification of late dues or liens. With states that offer HOAs more freedom and less regulation, HOAs may stipulate in their CC&Rs that they have the right and power to not only file a lien against your property, but also to foreclose on that lien, foreclosing on your home just as a bank would.
The laws around how much notice your HOA must give, as well as the amount for which they charge in fees, and the minimum delinquent amount allowed before a lien is filed vary from state to state. Check with your HOA’s CC&Rs, as well as state laws that impact the power that your HOA has in your neighborhood.
How Do I Sell My Home When I Have a Lien?
Understand that your homeowner’s association can file a lien, and liens are a matter of public record. If you’re ready to sell your home, it is in your best interest to settle the lien with your homeowner’s association as soon as possible. Whether this is settled by the payment of the delinquent fees, or by other means, it is important that you ensure you’re not passing these debts on to the next owner of your current home. A new buyer may love your home, but be discouraged by the debts that come with the home. Because these debts will transfer with a change in ownership, the lien is often actually filed against the property, instead of the individual.
As you’re thinking of selling your home while it still has an HOA lien, remember that HOA liens threaten lenders, too, and that you, the homeowner, aren’t the only one who has to live with the consequences. In many cases, a lien on your home through your HOA holds more power than the mortgage of the home. Not only can your HOA lien affect how a potential buyer feels about moving forward with the purchase of your property, an HOA lien can also threaten your lending institution that legally owns your home. Unless you bought your home outright, your home officially belongs to your lender, typically a bank, who also owns the mortgage to your home. Paying the whole amount of your mortgage, taxes and sales fees included, puts your home in your name and fully owned by you, but also means that it is you, not your former lender, who will have to pick up the tab to settle the debt. As previously mentioned, whether or not your mortgage is paid off, a lien from your HOA can end in a foreclosure and sale of your home to cover the debts. Even if your debt is only a few hundred dollars, if left unpaid for long enough, you’ll find yourself in legal trouble with your homeowner’s association.
After the Lien
In an ideal world, you won’t fall behind on your HOA assessments, and if you did, you could settle them quickly and amicably. In the real world, settling the debt directly with your HOA is the best possible outcome for you and your family, if you have one, but it can drag you into something that causes huge amounts of stress and grief. It is possible, of course, that a lien placed on your home by your HOA could have some flaws – and if this is the case, it’s important to hire a real estate attorney to help you navigate the problems with the debt. Sometimes, the fees from your HOA are deemed to be unreasonable in a court of law, and it is possible for an HOA lien to be declared invalid by a judge. Your HOA may have miscalculated dues and fees, compromising their case against you. There may have been steps missed in following the state laws that determine how the lien must be filed, or foreclosure conducted, your HOA might go against their own CC&Rs, or your HOA might have other issues preventing them from moving forward. Whenever you find yourself in a compromising situation with your property, contacting your local real estate agent is a great first step to helping yourself.