If you do not pay your HOA dues in California, the association may put a lien on your house and foreclose.
If you are a California homeowner and fall behind on your assessments (or dues):
If the HOA starts a foreclosure, you might have a defense to the action, such as the association charging you too much, imposing unreasonable fees, or failing to follow state laws.
Or you might be able to negotiate a way to get caught up on the overdue amounts and save your home. You may be able to negotiate a reduced amount or enter a repayment schedule.
The Homeowners Association (HOA) can take various actions if you don't pay your dues, including charging you late fees interest, placing a lien on your property, taking legal action, and even foreclosing on your home.
When you buy a single-family home, townhome, or another home in a planned community with covenants, you'll most likely pay fees and assessments, often collectively called "assessments," to an HOA. If you fall behind in the assessments, the association will likely initially try to collect the debt using traditional methods. You may receive a call from the association or a letter.
If these tactics fail to get you to pay, the association may try to collect money from you in other ways. The association could take away your privileges to use the common facilities or file a lawsuit for a monetary judgment against you.
Based on the association's Declaration of Covenants, Conditions, and Restrictions (CC&Rs) and state law, most HOAs also have the power to get a lien on your property if you become delinquent in assessments. A lien is usually placed on your property if you are behind in your payments. The association may record a lien with the county recording office to notify the public that it exists, even if state law does not require it.
The property's title is clouded by an assessment lien, making it difficult to sell or refinance your home. In addition, the property can also be foreclosed to force a sale to a new owner—even if the property has a mortgage.
California doesn't allow liens to be recorded for 30 days after a homeowner has received notice from the HOA about delinquent assessments. The notice should include:
Before recording a lien on delinquent assessments the association must offer and, if asked, participate in dispute settlement under the "meet-and-confer" program. (Cal. Civ. Code §§ 5900 to 5920, § 5660(e).) California law also allows you to submit a request for a meeting to discuss payment plans with the board. (Cal. Civ. Code § 5665.)
If you do not find a solution to pay the outstanding amounts, the HOA may record a lien against your property at the county level. (Cal. Civ. Code § 5675.) All record owners must be notified within 10 calendar days of the recording. (Cal. Civ. Code § 5675(e).)
Be on the lookout for legal changes
You'll learn about California common interest laws and statutes in this article. The Davis-Stirling Common Interest Development Act, (Cal. Civ. Code §§ 4000 through 6150) governs "common interest developments" in California, which means nonprofit corporations or unincorporated associations created for the purpose of managing common interest developments. (Cal. Civ. Code § 4100, § 4080). The term "HOA", as used in this article, is intended to include these types of associations.
Statutes change, so checking them is always a good idea. The way courts and agencies interpret the law and apply it can also change. Some rules may even differ within one state. This is just a small list of reasons why it's worth consulting an attorney.
Only the HOA Board of Directors can decide to record an assessment lien. Most members must approve the board's decision at an open meeting, and the vote recorded in the meeting minutes. (Cal. Civ. Code § 5673.)
In California, an assessment is considered delinquent 15 days after it is due unless the CC&Rs provide for a longer amount of time. (Cal. Civ. Code § 5650.)
If a delinquent assessment is made, the association can recover:
What is the maximum amount of late fees for a HOA in California
The late fee can't exceed 10% of the delinquent assessment or $10, whichever is greater, unless the CC&Rs specify a late charge in a smaller amount, in which case any late charge imposed can't exceed the amount specified in the CC&Rs. (Cal. Civ. Code § 5650(b)(2).)
In California, 30 days after the lien was recorded, the HOA may foreclose its lien judicially or nonjudicially. (Cal. Civ. Code § 5700, § 5705, § 5710). Most HOA foreclosures in California are nonjudicial.
California law limits a HOA’s ability to close in certain circumstances. The HOA is not allowed to foreclose on a property unless the following conditions are met:
What power does an HOA in California have?
If the HOA cannot foreclose on your home, they may instead sue you to obtain a money judgement. (Cal. Civ. Code § 5720.)
Before initiating a foreclosure, the association must also offer a "meet-and-confer" program or an alternative dispute resolution method with a third-party neutral. (Cal. Civ. Code §§ 5925 to 5965, § 5660(f).)
If the HOA forecloses using a nonjudicial process, the foreclosure is subject to a 90-day right of redemption after the sale. (Cal. Civ. Code § 5715.) You must pay all the assessments, interest, lawyers' fees, and repair costs to redeem your property. (See Barry v. OC Residential Properties, LLC 194 Cal.App.4th 861 (2011).)
The redemption period for judicial foreclosures:
It's a common misconception that an association cannot foreclose on your home if you are current with your mortgage. But an association's right to foreclose isn't dependent on whether you're up to date on your mortgage. What happens in a foreclosure depends on the lien priority.
The priority of lien holders determines whether they will be paid. The "first in time first in right rule" is generally followed by lien holders. This means that the lien recorded first on the land records will have higher priority. The first lien gets priority over other liens and the proceeds from the foreclosure sale.
Any excess proceeds after the first lien has been paid in full will go to the next lienholder and continue until that lien has been paid. If a lien is low in priority, it may not get anything from a foreclosing sale.
State law or governing documents for an association may adjust the lien priority.
In California, an HOA lien is before all other liens recorded after the notice of assessment, except that the CC&Rs may provide that the HOA lien can be subordinated to any other liens and encumbrances. (Cal. Civ. Code § 5680).
Depending on the recording date, a lien from a previous mortgage may remain on a property after an HOA has foreclosed. The purchaser at the sale will take the title to the property subject to the lien.
California law requires HOAs to provide their members with a schedule for fines and charges, which must also be reasonable. (Cal. Civ. Code § 5850.) HOAs can't charge interest on unpaid fines. (Cal. Civ. Code § 5725(b), § 5650(b)(3).)
HOAs can't also charge late fees for unpaid late fines and late fees. Because state law allows a late fee of 10% or $10, whichever is greater (unless the CC&Rs specify a lesser amount) against delinquent assessments, late charges can't be imposed on overdue late charges or unpaid fines. (Cal. Civ. Code § 5650(b)(2).)
An HOA cannot collect unpaid fines using the lien or nonjudicial foreclosure process available to delinquent regular and special assessments. (Cal. Civ. Code § 5725(b).) But the HOA may file a lawsuit, like in small claims court, or wait until you sell your home and demand payment during escrow.
Consider consulting a California foreclosure lawyer to explore all your legal options if you are facing an HOA foreclosure.