As it stands, about 26% of the US population lives in homeowners association communities.
HOAs can provide a range of benefits for residents, but they also have various responsibilities. HOAs often help increase property values. Some residents, however, may find themselves in situations where a rental valuation will show their property has a lower value than it should. When an HOA lien is in place, this is likely to happen.
So what exactly is an HOA lein? Keep reading to find out.
What Is an HOA Lein?
When someone buys a home in an HOA community, they immediately become a member of that association. As such, they need to follow HOA rules and member obligations. This includes paying regular HOA dues.
Dues vary depending on the association. They can also change with time, so they may be more expensive one year than the year before. HOA boards make decisions on how to spend collected dues on behalf of the community.
Sometimes, community members don't pay their HOA dues. This can happen for a range of reasons, and an HOA board is likely to take action. One of the most effective routes to take is to introduce an HOA lien.
This is a legal claim of the resident's property by the association. When one of these is in place, the resident will find it significantly harder to refinance or sell their property. After filing a lien, an association can also choose to initiate foreclosure proceedings.
How Do HOA Leins Work?
In most cases, a lien will attach to a property automatically. Sometimes, however, an HOA will need to record it with the county recorder's office. This acts as a public notice that verifies the existence of the lien.
The homeowner will need to pay the unpaid dues along with any other fees related to the lien. Depending on the HOA's governing documents, this might change. Other costs the owner may have to pay can include interest, late fees, and attorney fees.
If the owner pays off everything they owe, the HOA will then record an HOA lien release. How long everything takes can vary, but associations typically need to file the release within 21 days and send a copy to the owner.
What Happens After an HOA Foreclosure?
If the owner fails to pay off their debt, the association may need to foreclose on the lien. This usually works similarly to a standard foreclosure. HOAs may even be able to do this on properties that have a mortgage on them.
There are two types of foreclosure. A judicial foreclosure involves going through court and can take more time. A non-judicial foreclosure doesn't involve a court system so tends to be a lot faster.
Either way, a homeowner will want to avoid this.
Rental Valuation and HOA Liens
If someone performs a rental valuation when there's a lien on their property, it will naturally be lower. Homeowners should always pay their HOA dues to avoid this issue, as it can be far more costly to deal with a lien after it's put in place.
PMI Austin Metro has been providing real estate services in Austin and the surrounding communities and our property managers have decades of experience. Take a look at our association management page to see how we can help your HOA community.
