On occasion you will hear a homeowner association (HOA) member stating they do not have to pay the HOA’s assessment. This proclamation typically stems from the “unrealized member” stating they had ‘never agreed to join the HOA’ when they bought their home. This “not a member” belief possibly could originate from the “unrealized member” claiming to have never used the HOA’s amenities, and thus, is not a member of the HOA.
We once had a delinquent HOA member explain how he was not a member of the HOA in a clerk of court foreclosure hearing. Later at a subsequent court hearing, he explained this to a district court judge. At the end of this fiasco, this HOA member ended up paying over $20,000 in legal fees to the HOA. At the time, this $20,000 would have paid forty years’ worth of HOA annual assessments.
Whatever the case may be on why someone would not believe they are an HOA member, if they own within an HOA, they are members of the HOA. There are rare exceptions to this rule. For example, when the original HOA governing documents have been filed incorrectly. We manage a five hundred plus HOA where it was discovered that eleven lots where not within the HOA. On these eleven lots, there was an error in recording the original deeds to the development’s original plat. When this was discovered, with the exception of two lot owners, nine lot owners opted to join the association. These nine lot owners realized the home value of their property being within the governing restrictions of the HOA. These nine owners also realized their home values would benefit from having access to the HOA’s amenities, from which the two lot owners who refused to opt in, were barred.
There are voluntary HOAs and compulsory HOAs, these are sometimes referred to as mandatory HOAs. With a voluntary HOA, the individual lot owner can decide to opt in to the HOA and abide by the covenants and pay any related HOA assessments. This opting in can be required at closing or could possibly be done less formally later after closing.
A voluntary HOA can function similarly to a compulsory HOA in that there is typically a board of directors. In many situations, HOA dues can be assessed. This board of directors can draft and enforce rules and regulations. Depending on how the HOA’s governing documents are written and sometimes state statues, even if a lot owner has opted in to the voluntary HOA, it may be difficult to collect assessments and enforce the HOA’s rules and regulations.
If a lot owner has opted out of the HOA it can be extremely difficult, if not impossible, to enforce the HOA’s rules and regulations. As a result, the voluntary HOA could possibly have no real authority to sanction lot owners who have opted out, or have violated the HOA’s rules and regulations. In these instances, if the covenants or the deed restrictions have been violated, it is typically another lot owner, or group of lot owners who must press the covenant or deed violation in court at their own expense.
There is a case within a lakefront voluntary HOA which had homes exceeding a million dollars where a lot owner was clearing and building his own home. This lot owner was a successful builder and was physically building the lakefront home himself. Once he cleared the lot, he had a very old singlewide trailer brought in and placed at the property line of his lot. This old singlewide trailer was for him and his family to live in while he was constructing the new home. Shortly after beginning the home, the economy took a downturn and work on the home stopped with only the basic framing completed and nothing else. To say his neighbors were upset about the old singlewide trailer originally being brought in, is an understatement; Once construction stopped, the neighbor’s anxiety reached even higher levels. Being a voluntary HOA, these concerned neighbors were forced to seek remedies individually through the court system, which was an expensive and arduous undertaking. It took over three years to resolve the covenant violation and cost many thousands of dollars to the individual lot owners who pursued legal remedies.
The fundamental difference, in most instances, between compulsory HOAs and voluntary HOAs is the ability of the compulsory HOA to file liens against lot owners within the HOA. With this lien authority, the HOA has the ability to legally enforce the HOA’s governing documents. In most states, this lien gives the HOA the ability to foreclose on lot owners. A lien can typically be placed for nonpayment of HOA assessments and HOA covenant violations.
The authority giving the HOA the ability to place liens is typically found within the covenants, conditions, and restrictions (CC&R). The detailed legal basis and mechanism are typically located in a “Lien for Assessment” provision. This provision could be titled with similar type names such as “Membership and Creation of Lien” or “Personal Obligation for Shared Area Expenses.” These provisions will typically address the financial obligations of members and the collection abilities of the HOA. While there is typically a specific section addressing the ability to lien and the related mechanism, there could possibly be other provisions addressing the lien topic as well. The following is a typical example of the “Membership and Creation of Lien” section:
Section One. Membership and the Creation of the Lien and Personal Obligation of Assessments. Each Lot Owner by acceptance or conveyance of a deed therefor, whether or not it shall be so expressed in such deed, is deemed to covenant and agree to pay to the Association the (1) annual assessments and/or related charges, and (2) special assessments, such assessments to be established and collected as hereinafter provided. In addition, if applicable, each Lot Owner by acceptance or conveyance of a deed therefor, whether or not it shall be so expressed in such deed, is deemed to covenant and agree to pay to the Association (3) duly levied fines by the Association.
The annual assessments, the special assessments, related charges, and duly levied fines, together with interest, late charges, costs and reasonable attorney’s fees, shall be a charge on the Lots and shall be a continuing lien upon the Lots against which each such assessment is determined. Each such assessment, related charges, and duly levied fines together with interest, late charges, costs and reasonable attorney’s fees, shall be the personal obligation of the person who was the Owner of such Lot at the time when the assessment, related charges, duly levied fines was imposed. The personal obligation for delinquent assessments, related charges, and duly levied fines shall not pass to his or her successors in title unless expressly assumed by successors. If the Association should cease to exist or dissolve by legal action, in that event, every Owner of a Lot at the time of required maintenance or covenant enforcement, shall be jointly and severally liable for any and all costs attendant thereto.
The first sections of most CC&Rs, the authority of the HOA to place liens is put forth. Typically, lien language in this section is laid out in more of an overview or description of the entire HOA. Rarely at this point does the lien language go into as much detail as what you would find in a specific section such as the “Membership and Creation of Lien.” Nor is this the only place the ability to lien is noted. These first sections of most CC&Rs help to give an overview of the HOA and it is proper to mention liens because of the importance of being able to utilize liens in governing the HOA. The following is a typical example of what is found at the beginning of a HOA’s CC&Rs:
WITNESSESED WHEREAS, Declarant desires to protect the attractiveness of the homeowner association, to prevent any future impairment thereof, to curtail and prevent nuisances, to preserve, protect and enhance the property values and amenities of all properties within the homeowner association and to provide for the maintenance and upkeep of the exterior of all residential units and the Common Area, as hereinafter defined; and to this end, desires to subject the real property shown upon the attached Exhibit “A”, to the coverage of the covenants, conditions, restrictions, easements, charges and liens hereinafter set forth, each and all of which is and are for the benefit of said property described below, and each Owner and occupant thereof; and…
There is a third area of CC&Rs where the lien process is typically mentioned and probably the section that is most reviewed for clarification on the lien processes. This section will typically be called “Assessment” or another similar word or phrase. The following is a typical example of what is found in this type of section of an HOA’s CC&Rs:
Assessment Section I. General. As more fully provided and defined in the Declaration, each Lot Owner or Member is obligated to pay the Association monthly and special assessments, which are secured by a continuing lien upon the Lot against which the assessment is applied. Any assessments not paid when dues, shall be considered delinquent. If the assessment is not paid within thirty (30) days after the due date, a late charge of $20.00 shall be added to the outstanding amount and the assessment shall bear interest from the date of delinquency at the rate of eight (8%) percent per annum. The Association may bring an action at law against the Lot and the Lot Owner personally obligated to pay the same or foreclose the lien against the property. In addition, interests, costs, and reasonable attorney’s fees of any such action shall be added to the amount of such assessment. No Owner may waive or otherwise escape liability for the assessments provided for herein by non-use of the Common Area or abandonment of his or her Lot.
While the lien process can be mentioned throughout the CC&Rs, and the word lien can be referenced throughout most compulsory HOA’s CC&Rs, the three above sections addressed in this blog are probably the three most commonly referenced for lien guidance. The actual lien legal processes can vary from state to state, and even from municipality to municipality.
William Douglas Management, providing excellent property management services to HOAs and condominium associations since 1980.
William Douglas Management offers property management services
HOA Property Management Charlotte NC
HOA Property Management Raleigh NC
HOA Property Management Greenville SC
HOA Property Management Greensboro NC
HOA Property Management Charleston SC
HOA Property Management Columbia SC
HOA Property Management Myrtle Beach SC
HOA Property Management Mooresville NC
HOA Property Management Fort Mill SC
HOA Property Management Asheville NC
© Copyright 2021 – William Douglas Property Management, Inc.