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What Happens When Homeowners Don’t Pay HOA Fees?
At the start of each year, the HOA board comes up with a budget which they then use to calculate how much to charge each homeowner in monthly or annual fees. These HOA fees play an important role in the overall well-being of the community – without them, an association can easily run out of money to pay for necessary maintenance and repairs.
If a homeowner within an association doesn’t pay their HOA fees or follow the community’s Covenants, Conditions, and Restrictions (CC&Rs), they might face fines, a lawsuit, or even a foreclosure. While not all associations follow the same procedure when it comes to HOA collections and members defaulting on payments, here are the most common actions taken by an HOA if a member doesn’t pay their HOA fees.
Notice of missed payment
The first thing you may receive from your HOA is a notice of missed payment or a notice demanding payment. The purpose of this letter is to inform you that you’re late on your HOA fees.
The notice typically includes details of your outstanding debt, such as the total amount due and how long the payment has been due. It may also outline what you can expect the board to do should you fail to settle your bill, such as refer your account to an HOA collection agency.
In addition to the notice of missed payment, your HOA may opt to include a late fee on top of the regular HOA fee. This late fee, depending on how long it has been left unpaid, may also accumulate interest over time, meaning the amount can really add up.
Suspension of rights
The next step the board may take is to suspend your rights as a member of the association. That usually means you won’t be able to use community amenities, such as the clubhouse, the pool, the gym, and other common facilities.
The HOA board can even take it one step further and revoke your right to vote on issues concerning the community until you’re fully paid. Your typical rights within the community will be revoked; even getting your trash collected might become an issue.
File a lawsuit
Unfortunately, if HOA dues are still left unpaid after the above actions have been taken, the HOA may choose to take the legal route. A number of states allow HOAs to file a lawsuit against delinquent residents and seek compensation for the amount due via their bank accounts or wages.
Place a lien
Most associations have the right to place a lien on your home should you default on your assessments. Should this happen, the lien will attach automatically to your property as of the due date of the HOA fees. Your association may choose to record the lien in the county records, but this is usually not mandatory.
After the HOA places a lien on your property, life may continue as normal until one of these three things takes place:
- You try to take out another mortgage
- You attempt to sell your home
- The HOA forecloses on your home
After a lien is placed on your home, the HOA can choose to foreclose on that lien. It doesn’t matter if there is a mortgage on the home — as long as state laws and the CC&Rs allow it, you may face foreclosure. There are two ways an HOA can foreclose on a lien:
- Judicial foreclosure: the HOA will file a lawsuit against the delinquent resident and then secure the court’s permission to sell the home
- Non-judicial foreclosure: the HOA simply needs to follow certain procedures set forth by the state laws and the association’s CC&Rs
Regardless of the reasons that a homeowner isn’t paying their HOA fees, it can create a stressful and tense situation between the board and the homeowner. If you’re looking for an experienced HOA management company to help you with financial services and accounting, contact APS Management today.