The Powers of an HOA (Homeowners Association)

Most of us today live in a planned community with a Homeowner’s Association governing things like, where we park our cars, how we can landscape our yard, the color we can paint our house, and any architectural design changes you will make to your home. Homeowner Associations were created with good intentions and most people are perfectly fine with abiding by the rules as the rules were intended to protect our property values – and who doesn’t want that?  When they fail is when perhaps your life changes…

• Your older son and his wife have lost their home and they come to live with you bringing with them more cars and parking issues…
• You lose your job and struggle to keep the electricity on and just can’t see spending another $50 a month on the homeowner’s association…

Arizona is not a Super-liens state (but almost).  A Super-liens state is where the Association has first priority lien over even your mortgage and can start foreclosure proceedings!  So you are thinking this is a good thing but wait…They do have priority over the second lien holder and they can hold up a short sale.  If you are one of those people that have not been able to (or chose not to) pay your association dues for a year while you have also not paid your mortgage you may be in for a surprise when you go to short sell your home.

Here is what happens with an association and their dues.  Associations are hurting too because of the high number of foreclosures. They depend upon these fees to maintain the common areas– and believe me that is a huge expense.  After a period of non-payment, the Association will turn over the homeowner’s account to their attorneys.  That’s right attorneys.  So the late fees, fines and penalties will NOW include attorney fees.  I have seen several years worth of unpaid Association fees along with attorney fees add up to $10,000!!.

Here is where their power is evident.  Usually a 1st lien holder will only give so much to a junior lien holder and that is what the association is considered. In order to get approval on anything less than what is owed the attorney’s office must be consulted.  If the association does not agree with the amount allotted by the bank, the Association can deny the sale. All parties must agree because the Association’s lien must be released in order to proceed! But heed this warning.. even if you should decide to let the property go to Trustees Sale (AZ) or foreclose, the lien FOLLOWS YOU and is not forgiven.  You will not be absolved of this lien and at some point you will have to deal with it.

In conclusion I hope that if you find yourself in a situation where you cannot pay your mortgage and think you cannot pay your Association dues the best course of action is to call the Association’s property manager and tell them about your situation.  In some cases they will work with you, maybe even give you some extra time or make some arrangements.  If at all possible DO NOT stop paying your Association dues – it can hurt you in the long run.

This article was written by my Real Estate Partner, Deidre St. Romain at Realty ONE Group, and I thought I would share this.

Deidre St. Romain

Deidre.St.Romain@gmail.com