HOA & Condo Liens - Saving Your Home

Frequently I am asked to help homeowners settle their past due assessments with their condo or homeowners association. This is a very serious situation because the association can and will foreclose much faster than any mortgage company or bank.

Frequently homeowners make the mistake of assuming that 1) if the mortgage company or bank is foreclosing, the association cannot; 2) if the homeowner pays the past due assessments, but not the interest, late fees or attorneys' fees, the association cannot foreclose; 3) sending a check to the property manager will stop the foreclosure; 4) the homeowner can withhold assessments if the association is not doing their job and 5) the association can waive some of the past due assessments and charges.

These are all incorrect and a big mistake. Trying to get around these issues will only increase the attorneys' fees and other charges the association is entitled by law to correct.

It is very important to note that BY LAW, any payments are applied to attorneys' fees and costs FIRST, interest and late fees NEXT and assessments LAST. Unless you pay the full amount being demanded, you will always be past due in assessments and the association can foreclose.

Your options, if you cannot pay the full amount demanded, are:

1) Negotiate a payment plan;

2) File Chapter 13 bankruptcy.

The first option may not be the ideal solution because many association law firms charge $250 to set up the payment plan and $50 per month to process payments, which adds considerably to the amount due and owing.

Chapter 7 bankruptcy is not an option for saving the home. The discharge of association assessments in a Chapter 7 applies only to assessments that came due prior to filing bankruptcy and only extinguish the debt to the person, not the property. This means the association can still foreclose against the property. Also, the homeowner is still liable for assessments that come due after filing bankruptcy.

If a homeowner wants to avoid the foreclosure of the pre-petition assessment lien, the homeowner will have to pay off the pre-petition debt (either in full or through a settlement with the association) even though that debt has been discharged, or file a Chapter 13 bankruptcy which will allow the homeowner to spread the debt over a five-year payment plan. The association may or may not be entitled to 100% of the charges and if the association fails to file a claim, they will not receive any pre-petition assessments and charges.