When an HOA board encounters unpaid dues, its first instinct may be to evict delinquents. Whether or not an HOA can do this, though, depends on a few things. Additionally, if an HOA does have the authority to do so, it is important to follow the right process to avoid claims of invalidity. Adhering to the proper procedures and requirements protects the association from potential liability.
Why an HOA Would Evict Delinquents
One of the primary responsibilities of a homeowners association is maintaining common areas. An HOA must ensure that sidewalks, stairwells, and lobbies are clean and pleasing to the eye. It must also maintain facilities such as swimming pools, playgrounds, and fitness centers, among other amenities. It must keep streets clean and parking lots free from potholes.
None of this would be possible, though, without adequate funding. This is where HOA dues or fees come in. When homeowners join an HOA, they agree to fulfill a monetary obligation. This involves paying regular fees to the association.
Association fees are not usually fixed. They can change over time depending on the board’s budgetary calculations. These calculations are affected by a number of factors, including the association’s needs, price increases, and economic conditions.
When homeowners stop paying their dues, they become delinquent. As a result, the HOA can enforce certain penalties upon them. But does this include eviction? Can an HOA evict delinquents?
Can You be Evicted for Not Paying HOA Dues?
Homeowners who default on their HOA fees can face a number of possible consequences. These include liens and foreclosures, but what does these even mean? Can a homeowners association kick you out for not paying dues? Can an HOA evict homeowners?
Eviction often pertains to landlords and tenants. In the case of HOAs, eviction is not the proper term. Although an HOA can’t evict homeowners in the same way landlords can evict tenants, that doesn’t mean homeowners are not totally safe from losing their homes. Depending on state laws and the governing documents, an HOA can foreclose on a homeowner’s property.
Typically, an HOA will first place a lien on the home once the account becomes delinquent. Placing a lien on a home often requires filing it with a local agency, such as a recorder’s office. After that, the HOA can initiate foreclosure proceedings if the homeowner still hasn’t settled their unpaid dues.
It is important to consider state laws and the HOA’s governing documents regarding foreclosure. Certain limitations or requirements may be in place. For instance, in North Carolina, an HOA can only start foreclosure if the owner’s dues have remained unpaid for at least 90 days (N.C. Gen. Stat. Section 47F-3-116(f) and Section 47C-3-116(f)). Many states and CC&Rs also require written notice, among other requisites.
Can an HOA Evict Tenants?
If the HOA leases property to a tenant, it may evict the tenant as a landlord would. A rental agreement to outline the terms and obligations of the deal is essential.
However, if the HOA is not directly responsible for the tenant, it may not have the authority to evict them. The HOA would need to turn to the homeowner, who functions as the landlord, for remedy. After all, it is ultimately the homeowner’s responsibility to pay HOA fees, even if their agreement places the obligation on the tenant.
Two Types of Foreclosures
It has been established that HOAs deal with foreclosures instead of evictions, so it is imperative to understand the two types of foreclosures: judicial and nonjudicial.
- Judicial Foreclosures. To pursue this course of action, an HOA must file a lawsuit and obtain a judgment from the court to foreclose on an owner’s home.
- Nonjudicial Foreclosures. With nonjudicial foreclosures, an HOA need not file a lawsuit and obtain a judgment from the court. Instead, it must adhere to the requirements and procedures outlined in state laws and its own CC&Rs.
What is the Foreclosure Process?
The HOA foreclosure process is often complex, making it difficult for board members to go through it alone. An HOA board is better off hiring an HOA management company or HOA attorney to help with the process. While specific steps can differ from one community to another, the foreclosure process follows the steps below.
1. Initiation
This jumpstarts the foreclosure process. When a homeowner stops paying their dues, the HOA begins its collection actions. Following state laws and its CC&Rs, the HOA may place a lien and initiate foreclosure proceedings.
2. Foreclosure Judgment
The HOA receives a foreclosure judgment after going through the proper legal proceedings. This gives the HOA the authority to push through with the foreclosure sale.
3. Sheriff’s Sale
The HOA schedules a sheriff’s sale with the help of the County Sheriff’s Office. During this sale, the foreclosed property is sold to the highest bidder.
4. Redemption Period
The redemption period refers to the window during which the homeowner can settle their outstanding debts and stop the sale of the property. If successful, they retain ownership of the home. Specific timeframes can vary, though it is usually a six-month period.
5. Transfer of Deed
If the homeowner fails to retain ownership of the property, the sale proceeds. At this point, the Sheriff’s Office will provide a Sheriff’s Deed to the winner of the bid. This deed transfers ownership of the property from the old to the new owner, who then assumes responsibility for paying HOA dues.
Consequences of Unpaid HOA Dues
Homeowners should understand that failing to fulfill their monetary obligations to their HOA comes with consequences. Once a homeowner defaults on their HOA fees, the association can take a variety of actions, including but not limited to the following:
- Late Charges. An HOA may charge a late fee and interest on top of the unpaid amount, effectively increasing the homeowner’s existing debt to the HOA.
- Temporary Suspension of Privileges. In some cases, an HOA may have the power to revoke a homeowner’s rights and privileges temporarily. This includes revoking voting rights and barring the homeowner from using the amenities.
- Liens. HOAs commonly penalize delinquent homeowners by placing liens on their homes. Liens make it harder for homeowners to sell their homes or refinance their mortgages. Furthermore, the HOA can choose to foreclose on the lien later.
Other Ways to Reduce HOA Delinquencies
While foreclosures are effective for HOAs to recoup losses in unpaid dues, they should serve as a last resort. There are other collection methods HOAs can utilize to reduce delinquencies.
1. Waive Late Fees
Waiving very late fees that encourage on-time payments may seem counterintuitive. However, homeowners may feel more inclined to settle debts if the HOA exercises some grace when debts become too large. An HOA board can offer to waive the late fees and interests if the owner agrees to pay their unpaid dues in full.
2. Offer Payment Plans
Payment plans are a good way to collect delinquent fees while making things easier for homeowners. These plans break the debt into more manageable payments, allowing owners to settle their debts in increments.
3. Collect Rent
If the property ends up in the HOA’s ownership, the board can opt to rent it out instead. This can help with the budget gap brought on by delinquencies.
4. Negotiate With the Mortgage Lender
Sometimes, the mortgage lender has a vested interest in the property. In such cases, an HOA may be able to negotiate with the lender and ask them to cover the unpaid dues. The lender can then include them in the homeowner’s mortgage payments.
The Final Word
Many HOA boards may feel the urge to evict delinquents. However, it is important to understand that eviction and foreclosure are different. Moreover, foreclosure may be effective, but an HOA should exhaust all other options first before resorting to this method.
Cedar Management Group can help HOAs and condo associations manage collections and delinquencies. Call us today at (877) 252-3327 or contact us online to learn more!
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- HOA Foreclosure: Can An HOA Foreclose Your Home?
