Horror stories abound of homeowners who have had their homes foreclosed and sold out from under them because of liens placed by their homeowners’ association. An article on finance website Bankrate.com lists a few reports received by the publication, such as the story of a woman in Tampa, Florida, who was unaware that her attorney had paid $497 short on her outstanding HOA fees of $4,000. Her HOA foreclosed on her home and sold it at auction for $4,651 to a property company, which then resold it for $88,000.
Check the validity of an HOA lien. This depends on several factors, including the contents of the HOA agreement and other documents. HOA liens may be invalidated for a number of reasons, including whether the association makes use of dubious accounting procedures.
Identify superior liens on the property. In most states, HOA liens are inferior to first mortgages and government tax liens, although they are superior to second mortgages and mechanics liens, or liens for unpaid repair work. You may be able to remove an HOA lien by proving it invalid because of the existence of a superior lien, or by showing a court that the merits of the lien are questionable.
Repay the HOA lien in full, depending on the amount of the lien. If the lien is valid and you can afford to pay it, it may prove less costly than trying to fight it. For example, the woman in Tampa, Florida, may have found it worthwhile to pay the outstanding fees instead of losing her home.
File a counter claim. In a 2011 case in Florida, homeowners who were sued for outstanding payments filed a counterclaim alleging that the HOA had failed to maintain the common areas, thereby entitling the homeowner to offset some of the outstanding payments.
Go to litigation to oppose the claim. Verify whether the HOA’s accounting procedures are accurate by requesting to view the books, and take them to an accountant to ensure that the amount of the lien is justified. A lawyer experienced in HOA liens will be able to identify whether you have a chance of winning in court.
Wait for the lien to expire. In some states, for example in Florida, HOA liens may become uncollectible over time because of the statute of limitations. In other states, the HOA has three years in which to foreclose against the lien or it expires.
File for Chapter 13 bankruptcy. If the property is worth less than the amount owing on the first mortgage, the homeowner has no equity in the property. Since the first mortgage holder is the senior liens, an HOA lien may be written off under these circumstances.