Homeowners associations (HOAs) affect everything from hedge height to rental valuation. When dealing with both homeowners and tenants, HOAs need the ability to enforce their rules.
HOA liens help homeowners associations encourage compliance in extreme cases. Not all homeowners and tenants know what these liens are, though. How does an HOA lien end up on a home?
We'll cover all of this and more in this article. Keep reading to learn about Pennsylvania law regarding HOA liens.
What Is an HOA Lien?
HOA liens indicate that the HOA has a creditor interest in the home. An HOA lien, under Pennsylvania law, has a higher priority than many other types of liens on the home. It still has lower priority than a mortgage, however, so the mortgage holder will receive payment before the HOA in the event of a judicial sale.
HOAs become creditors when HOA dues, fines, and assessments sit unpaid. This can also lead to late fees, which add to the total amount of money owed by the property owner.
When a home has a lien on it, the creditor with the lien must receive payment before certain types of transactions occur. The owner can't flip a home with a lien on it, for instance, as a lien prevents such sales.
Can an HOA Lien Lead to Foreclosure?
A HOA foreclosure begins when the homeowners association sees no other means of getting paid. As a creditor, the HOA can initiate foreclosure on the home.
HOA foreclosure can proceed through judicial or nonjudicial channels. In a judicial foreclosure, the HOA brings suit against the property owner in court. In a nonjudicial foreclosure, the HOA follows procedures set out in its own covenants, conditions, and restrictions document.
Removing an HOA Lien
An HOA lien, like any type of lien, goes away once the creditor receives payment of the debt. No debt means no lien, and owners can once again do whatever they wish with the property.
Note that this includes any associated fees and penalties as well as the lien itself. It's easiest to get rid of an HOA lien by contacting the HOA managers and figuring out a payment plan as soon as possible rather than letting things pile up.
How Do HOA Liens Affect Rental Valuation?
Some HOAs charge rental assessments for rental properties within the HOA. Like any home owners association assessment, if not paid, these can lead to a lien on the property.
While a lien may not have a direct effect on the valuation, the possibility of additional costs for the owner can lead to higher rents. Prospective landlords should look into the assessments charged by the HOA before choosing to make a property into a rental property.
Settling Accounts
An HOA lien can lead to foreclosure, but it doesn't have to. Most homeowners associations want to settle HOA dues issues before they lead to foreclosure. Resolving debt to an HOA should rank high among the priorities of all involved.
If you need help with rental valuation, HOA management, tenant management, or any other property management issue, reach out for an evaluation. Our locally-owned offices can help you improve the value of your assets and keep track of how your properties perform in real-time.
