Sunday, February 21, 2010

What Happens when Homeowner Association in California Forecloses on its Lien for Unpaid HOA Assessments?

During the time I served on the board of directors at our homeowners association here at Turtle Rock Glen, Irvine, California, we were never forced to make a decision about possible foreclosure on a home because of unpaid HOA assessments.
But other HOA boards are being forced to make such decisions during these challenging economic times.
What happens when a HOA board in California forecloses on such a unit for unpaid assessments, and the trustee sale brings no buyers because the prior owner didn't have equity and the property is under water?
It's possible that title to the home unit is transferred to the association (HOA) at end of trustee sale after foreclosure. 
However, if there was underlying mortgage loan secured by deed of trust, that lender will also probably foreclose.
What happens then?  After HOA forecloses and gets title, if the lender then foreclose on its note secured by deed of trust, will that wipe out the association's lien and right to recover unpaid assessments?
Probably so.  That HOA lien was probably wiped out for its own HOA foreclosing, and title to property transfers to the association (subject to the delinquent owner's 90-day redemption rights).  After title transfers, the association's lien is likely extinguished, and the HOA would then own the property.  The HOA collection rights would also extinguished according to California law.  
Warning:  HOA board members in California should be very careful and always consult with counsel at each step of the decision-making process about delinquent HOA dues and rights and responsibilities of the association. 

Harrison K. Long, Realtor & broker, Explore Group, Coldwell Banker Previews, Irvine, CA.  CA DRE #01410855.  Lawyer member of the California State Bar Association - State Bar number 69137.  Helping People with their Best Decisions About Real Estate at Orange County, California. 


Posted via email from Explore OC Homes


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