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Death Taxes and HOA Assessments
By: Lloyd L. Rabb III & Michael L. Rabb
09/01/2009
DEATH, TAXES AND HOA ASSESSMENTS __________________________________________________________ One thing as certain as death and taxes in this life are Homeowner Association (HOA) assessments; if you live in an HOA regular assessments must be paid to contribute to the HOA’s common expenses. Depending on where an individual lives the assessments may be relatively low or extremely steep. Homeowners who bought their properties during the recent real estate boom may find that the HOA assessments carry a far heavier burden than they ever expected. Of course, if the assessments are not paid then the HOA must engage in collection efforts. The most extreme collection effort an association can use is foreclosure and this remedy is controlled by Arizona statute.
Arizona Revised Statute §33-1807, gives the association a lien on a home for any assessment levied against that home from the time the assessment becomes due. The lien arises out of the recording of the association’s declarations with the county recorder’s office. When the declarations are recorded it perfects any lien interests that may arise on property for failure to pay assessments. Only a lien directly related to assessments may be foreclosed on. The amount of the lien can include: unpaid assessments, late charges related to those assessments, and reasonable attorney’s fees and costs incurred to collect the unpaid assessments. If the association chooses to foreclose on the assessment lien it must be foreclosed on in the same manner as a mortgage. The lien, however, may only be foreclosed if the owner has been delinquent in the payment of those monies for a period of one year or if the amount owed is $1,200.00 or more.
An association’s lien for assessments is superior to all other liens, interest and encumbrances on the home except for: liens or encumbrances recorded before the association’s deceleration was recorded, a recorded first mortgage or deed of trust on the home, a seller’s interest in a first contract for sale recorded prior to the association’s assessment lien, and liens for real estate taxes and other governmental assessments or charges against the home. However, an association’s lien for unpaid assessments is extinguished unless proceedings to enforce the lien are instituted three years after the full amount of the assessment becomes due.
It is important note that the association’s lien is superior to a second or third deed of trust or mortgage on the property. Therefore, if an association forecloses on a property, the second or third deed of trust or mortgage on the property will be extinguished unless appropriate action is taken by the mortgagee or trustee to protect their interest in the property.
A homeowner, escrow agent or lien-holder may request a statement from the association that sets forth the amount of any unpaid assessments against the home. If the request is made the association must, within 15 days after receiving the request, provide such statement. The statement provided is binding on the association. On the other hand, if an escrow agent requests such statement and the association fails to provide it within the 15 day time period, a lien for any unpaid assessment on the property is extinguished.
An association may have a lien for monies other than those directly related to assessments; like penalties imposed for non-compliance with the CC&Rs. The only way the association may collect those charges, however, is to obtain a judicial judgment, and record that judgment with the county recorder. The lien will then become effective upon conveyance; meaning that the lien will need to be paid off at the time the homeowner sells his or her property.
In the end, HOAs can be very beneficial to their members and their communities. However, the relation between the HOA and the member homeowners is created by statute and interpreted by our courts. So, HOAs and their members should be cautious in their dealings and be confident regarding their knowledge of their respective legal rights and obligations.
Authors:
Lloyd L. Rabb, III, Esq.
Michael L. Rabb, Esq.
The RABB/PENNY Law Firm, pllc
Lloyd Rabb is AV rated by Martindale-Hubble and listed in Law & Politics’, “Super Lawyers of the Southwest”, and in Best Lawyers in America.
Michael L. Rabb, Esq., focuses his practice in Real Estate Law and is a licensed real estate agent in Arizona.
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