What Happens if You Stop Paying Your HOA?

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A Homeowners Association, or HOA, is responsible for the maintenance and improvement of common areas used by residents of a community within its jurisdiction. The HOA also sets certain guidelines and standards that homeowners must adhere to when it comes to the property. The HOA charges the residents of the community in order to pay for these services. If you live in a community with an HOA, the payment of these assessments is mandatory.

Considerations

HOA assessments are usually due once a month, although some associations require annual payments instead. The HOA must deliver or send to the homeowner a written assessment of the amounts due. The homeowner then has a specified number of days to pay the assessment. Failure to pay can result in increased costs. The HOA assessments will compound and continue to increase until the bill is paid. The HOA has the power to add late fees and interest charges to the unpaid balance. The HOA can also add collections costs, including attorney's fees.

Significance

A HOA has the power to place a lien on the property for the unpaid balance, including any added fees and interest. Certain states, such as Texas, allow an HOA to foreclose on a property due to an unpaid HOA balance without going to court. This is called a non-judicial hearing. This means that the foreclosure process does not require court intervention. Instead, the property is sold at public auction. Non-judicial foreclosures proceed at a faster rate than judicial foreclosures.

Consequences

A homeowner can lose a home when the HOA fees in question are far less than the value of the home. Once the home is foreclosed upon, the HOA will sell the property to recover the amount of the HOA fees. In 2008, a soldier in Iraq lost a paid-for $300,000 home in Texas because he failed to pay HOA assessments due to his deployment. The homes were sold for $3,500. The soldier was later able to get his home back since he was protected under The Service Members Civil Relief Act, a law that protects those on active duty from certain legal and financial obligations, including foreclosure.

Prevention/Solution

Paying your HOA assessments avoids larger legal and financial problems down the road. Consult with a real estate attorney in your area before you stop paying the assessments or if you're facing foreclosure by a HOA. Some states have redemption periods, which is the amount of time you have to pay the assessments and fees and get the property back after the HOA takes title to the property. The redemption period in Texas is 180 days but in Florida, it's only 10 days.

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