Arizona HOA Liens
Liens: What they are and what to do about them?
Arizona law states that a homeowners association or condominium association has an automatic lien on your property “from the time [an] assessment becomes due.” This lien includes late charges, reasonable collection fees and reasonable attorneys’ fees. The HOA’s lien is superior to all other liens and encumbrances other than those recorded before the declaration, first mortgages, and liens for real estates taxes and other governmental assessments or charges.
What this means is that there’s nothing you can do to avoid this lien. You consent to the HOA having an automatic lien for unpaid assessments and other charges when you buy into a planned community. The lien is considered “automatic” because the HOA does not need to do anything to perfect the lien. Ordinarily, a party must record a notice in order to perfect a lien. But an HOA’s lien does not require any recording (though an HOA often will record a document for the purpose of increasing the amount it seeks from an owner).
Our experience with homeowners has identified certain common myths that we debunk below.
Myth #1:
The HOA Can’t Foreclosure Because I Have a Mortgage
This is, by far, the most dangerous myth. Homeowners think they are “safe” and cannot be foreclosed by their HOA because they have a mortgage. Having a mortgage does not prevent foreclosure. An HOA that forecloses a property takes it subject to any first mortgage. This means that the mortgage stays on the property. Don’t expect the HOA to pay the mortgage if it purchases the property at foreclosure. Of course, it is your credit score that will suffer.
Myth #2:
The HOA Won’t Foreclose Because My Mortgage(s) is/Are Too High
Your HOA doesn’t care how much you owe in mortgages. It sells the property at a sheriff’s sale subject to a first mortgage. This means that the new owner acquires the property and, if the mortgage goes unpaid, it may eventually lose the property in a trustee’s sale. Of course, as discussed above, it is your credit score that will suffer when the new owner tries to maximize its profit but minimize its expenses (the mortgage payments).
Many owners have two or more mortgages. This also does not protect you from foreclosure. Although Arizona law says that the first mortgage is protected, all other mortgages will get eliminated in the HOA’s foreclosure of the property. This means that second, third, or even fourth mortgages do not prevent an HOA from foreclosing.
Myth #3:
I Never Agreed to Give the HOA a Lien
A common misperception is that you have to expressly consent to a lien. But Arizona says that the HOA’s lien is automatically perfected when the CC&Rs were recorded (in all likelihood, years before you purchased your lot).