Homeowner’s Associations (HOAs), through their elected boards of directors, yield immense authority over the homeowners in their neighborhoods. Most homeowners do not realize this power includes the ability to foreclose on a homeowner’s home for unpaid HOA assessments.
An HOA board of directors, usually made up of elected neighbors, is obligated to collect assessments to operate the HOA and maintain the neighborhood. These dues provide for maintenance, streets, landscaping, and security in the case of gated communities. Part of the obligation to provide services requires the board to foreclose on its neighbors’ homes when they have unpaid assessments. Without collection of the assessments, HOAs cannot accomplish the obligations they are mandated to perform. The very nature of the HOA and assessment collection creates a delicate dynamic between board members and the other neighbors in the community. If assessments go unpaid, the board members may be left with no other option than to foreclose on a neighbor’s home to recover payment.
But how can the HOA foreclose on my home, you might ask?
An HOA’s power to foreclose comes from the HOA’s bylaws and Covenants, Conditions & Restrictions (CCRs). In order for the HOA to foreclose, the CCRs must first be recorded in the county where the HOA exists. If the CCRs are not recorded, the HOA cannot foreclose. Second, the CCRs must provide that a lien automatically attaches to a homeowner’s property for unpaid assessments before the homeowner has taken possession of the property. This gives the assessment lien priority over mortgages because the lien existed prior to the homeowner acquiring the home. Third, the HOA can only foreclose on unpaid assessments. If a homeowner has paid unpaid assessments but has outstanding attorney’s fees or administrative charges, the HOA cannot foreclose. Fourth, the HOA’s CCRs must contain a power of sale clause which would allow the HOA to foreclose without a judicial hearing. If the CCRs do not contain a power of sale clause the HOA must go through judicial foreclosure instead of the more favorable expedited foreclosure process.
Texas laws pertaining to HOA foreclosures are complicated and extensive. If you have questions regarding your HOA, your neighborhood’s governing CCRs, or a potential foreclosure, contact Rosenblatt Law Firm for more information.