HOA liens
Selling a house with HOA liens and past-due dues
The dues are rarely the problem. The problem is the collection costs, the transfer fee, and the demand that arrives two weeks into escrow with a number nobody expected.
What the association can actually do
Under California's Davis-Stirling Act an association can record a lien for delinquent assessments once it has given notice, and that lien can include late charges, collection costs and attorney fees on top of the dues themselves. It can then enforce the lien by nonjudicial foreclosure, through a trustee's sale, the same machinery a mortgage uses.
California does restrain that. An association generally cannot foreclose until the delinquency is more than twelve months old or above a statutory threshold. The limit is on when it can foreclose. Not on how large the balance grows while it waits.
The number that surprises people
A balance of a few thousand dollars becomes a demand several times that, more often than owners expect, because every reminder letter, lien recording and hour of the association's attorney is added to what you owe. The dues were the smallest part of it.
That is why the payoff demand matters more than the monthly statement. Ask the management company for a written demand that breaks out assessments, late fees, collection costs, attorney fees and the transfer fee separately.
The transfer demand, and why it cannot wait
On a sale the association issues a transfer disclosure and demand: current dues, any delinquency, the transfer fee, reserve contributions and any open violation against the property. Escrow pays it, and the sale does not close without it.
It also takes time to produce. An association that has been chasing a delinquency for a year is not going to turn a clean demand around in two days, so the request should go in early rather than the week before closing.
Violations are the other thing on the property
A letter about an unapproved fence or a shed nobody permitted is not money, but it can hold up a closing when it surfaces late. We buy with open violations in place and take on curing them, which is one less letter for you to answer.
Be straight about what the association has raised. A violation discovered in escrow costs more time than one disclosed at the start.
The lien is junior, and still has to be paid
An assessment lien recorded after your first mortgage sits behind that mortgage in line. California gives an HOA lien no priority over a deed of trust recorded before it, which is a meaningful difference from states like Nevada. The association cannot simply take the house out from under the lender.
It does not have to. The lien is paid at closing out of your proceeds like any other. What changes is your net, which is why the demand should be in hand before an offer is agreed rather than after.
Before you accept an offer
- Request a written payoff demand from the management company, itemised
- Ask about collection costs and attorney fees, not only the dues
- Get any open violation in writing, including what curing it requires
- Confirm the transfer fee and whether a reserve contribution is due
Common questions
Can an HOA foreclose over a few thousand dollars?
It can, within limits: California generally requires the delinquency to be more than twelve months old or above a statutory threshold before an association may foreclose. The larger risk in practice is not foreclosure but the balance growing with collection costs while the sale is delayed.
Who pays the HOA at closing?
You do, out of the proceeds, through escrow. The association's demand is paid as part of the settlement alongside the mortgage and property taxes, and the remainder comes to you.
Can you buy the house with the dues still unpaid?
Yes. The dues and the costs come out of the payout at closing, so there is nothing to pay up front. We just need the written demand early, so the offer reflects it instead of the number being discovered at the end.
What if the HOA says there is a violation?
That is common and rarely fatal. We take the property with the violation in place and deal with the association afterwards. What we will not do is pretend it was not disclosed.
Does a single late payment start a lien?
No. An association has to give notice before it records anything, and the statutory limits on foreclosure mean a small balance cannot be used to take the property. The real cost of waiting is fees, not the original assessment.
Related
Next step
Tell us the address and what is going on with it. We will look at the property and put a number in writing. Sending a message creates no obligation, and we will say plainly if we are not the right buyer for it.