Yes — and it can happen for surprisingly small amounts. HOAs and condo associations in most states have the power to foreclose on your property for unpaid dues, fines, and assessments. In some states, the HOA's lien even has super-priority over your first mortgage. Learn how HOA foreclosures work and how to fight them.
HOA foreclosures happen when a homeowner falls behind on HOA dues, special assessments, fines, or fees. The HOA records a lien against the property and can foreclose that lien — even for amounts as small as a few hundred dollars in some states.
In many states (including Nevada, Colorado, Washington, and others), HOAs have a super-priority lien — a portion of the HOA lien that jumps ahead of even the first mortgage in priority. When an HOA forecloses a super-priority lien, it can wipe out the first mortgage entirely. This has led to situations where homes worth hundreds of thousands of dollars were foreclosed and sold for a few thousand dollars in HOA dues. The first mortgage lender has no recourse because the super-priority lien extinguishes their interest.
Pay the Delinquent Amount
The simplest solution: pay what's owed. Many states give the homeowner a right to cure the default by paying the delinquent amount plus costs. Some HOAs are also willing to negotiate a payment plan.
Challenge the HOA's Authority to Foreclose
HOAs must strictly follow their CC&Rs and state law. Improper notice, failure to follow HOA board voting requirements, improper assessment calculations, or failure to follow collection procedures can defeat the foreclosure.
File Bankruptcy
Chapter 13 bankruptcy can stop an HOA foreclosure and allow you to pay the delinquent dues through a 3-5 year repayment plan. Post-petition dues must be paid going forward.
Notify Your First Mortgage Lender
Your first mortgage lender has a strong interest in preventing HOA foreclosure — especially in super-priority lien states where their lien could be extinguished. Lenders will often pay the HOA dues and add them to your mortgage balance.
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