Don't be surprised by a Homeowner's Association

Did you know that if you fail to pay a homeowner’s association (“HOA”) monthly dues the amount owing becomes a lien on your property.  As a lien, the HOA has the right to foreclose in the same manner as a mortgage.  The HOA does not need court approval to start the foreclosure. The HOA lien is superior to all other liens except:

1.         any document recorded against the property before the HOA declaration was recorded (this is the document creating the HOA);

2.         liens for real estate taxes; and

3.         a recorded first mortgage. 

So, if you fail to pay even 1 month of dues the HOA has the right to commence a foreclosure be serving papers and proceeding to a sheriff’s sale.  Also, similar to a mortgage, the unit owner is personally liable to the HOA for payment of the dues.  This means the HOA can also bring a court action for recovery of the money - they can sue you.  The HOA can choose to foreclose, bring a lawsuit or both.  Also, just because the HOA picks only one method of recovery does not mean it is barred from pursuing the other method at a later date. 

When you are purchasing a property governed by a HOA you should know the facts.  Mainly, how much are the monthly dues, are there any outstanding special assessments that you would be required to pay and are there any upcoming projects and assessments.  Minn. Stat. §515B.4-101 requires the seller to provide certain disclosures and notices to the buyer.  The purchase agreement should have an addendum with a notice of the buyer’s rights.  Further, a disclosure that will shed light on the important questions must be provided.  The buyer has a right to review the disclosure and HOA documents.  If the buyer does not approve, the purchase agreement may be canceled within 10 days of receipt. 

Whether you are a buyer or seller make sure that the statutory requirements for a sale are satisfied.