More than half of American households participate in a homeowners' association. These organizations help keep property values up, maintain common areas, and provide access to various amenities.
All of that effort takes money, though, and HOAs need ways to capture that money from delinquent homeowners. In extreme cases, failure to pay assessments and fees can lead to an HOA foreclosure.
A lot of people think that only banks can initiate foreclosure proceedings. These community associations can do so too. If you're looking for help managing your community, you should know what options you have.
Keep reading, and we'll cover when an HOA can foreclose on a property and ways an HOA homeowner can fight a foreclosure. We'll also deal with what HOAs do after foreclosure.
What Is an HOA Foreclosure?
An HOA charges membership dues, and failure to pay these dues can lead to foreclosure. An HOA foreclosure works like any other kind of foreclosure. These foreclosures fall into two categories: judicial and non-judicial.
Judicial HOA Foreclosure
Certain types of debt require judicial foreclosure. During a judicial foreclosure, the HOA must bring a lawsuit and take the matter to a civil court. A typical judicial HOA foreclosure involves debts from attorney's fees, penalties, or interest rather than normal debt.
Non-Judicial HOA Foreclosure
In a non-judicial foreclosure, no lawsuit starts, and no court supervision occurs. The property owner still gets all the homeowner rights associated with the foreclosure process, though, such as the right to remedy delinquencies and proper notice for hearings and other milestones.
How Does the Process Start?
An HOA foreclosure begins when a homeowner stops paying dues or other owed money. This leads to a lien on the property. A lien indicates that someone other than the homeowner, such as the HOA, has a right to the property.
Liens don't lead to foreclosure right away. Homeowners can pay the HOA community back and satisfy the obligation. If a homeowner pays, there's no need to start a foreclosure.
How Do Homeowners Fight HOA Foreclosure?
A homeowner can fight an HOA foreclosure on procedural grounds. If an HOA conducts assessments not covered under its covenants, conditions, and restrictions, the proceedings may stop. Breaking the legal rules for HOA foreclosures can also render a foreclosure null and void.
If you run a homeowners' association, make sure you consult with a management company and a lawyer before starting a foreclosure. You don't want to begin expensive proceedings for no reason.
What Happens Afterward?
A homeowners' association doesn't want to own homes. Depending on the circumstances, an HOA may try to sell the home or rent it out. After foreclosure, most HOA homes go to auction, but a rocky housing market may make that difficult.
Get What You're Due
While a HOA foreclosure represents the most extreme option in debt collection, homeowners' associations need the tools to collect on debts from homeowners. Whether you need to foreclose on an HOA member or find yourself facing foreclosure, you should do so with full knowledge of the process.
Do you need help managing your HOA? Do you have a delinquent homeowner? Contact us, and we'll help you solve any problem you face in the Dallas area.
