Why are HOAs foreclosing on more owners? A recent WSJ article points to HOAs avoiding their own financial collapse. Money is getting tighter due to rising insurance costs, vendor costs, aging infrastructure, shrinking reserves, and owners are experiencing a financial squeeze. This is also true in the western states, due to factors such as extreme weather risks (i.e. wildfire mitigation work), vendor and labor inflation, aging infrastructure, algae blooms in water features, stricter reserve mandates, utility cost increases (i.e. spikes in regional energy electric and water rates), and freight and basic services continue to see upward price pressure.    

There were 6,376 properties with HOA-related foreclosure filings in the first quarter of this year—spanning initial default notices to completed sales. That is up nearly 40% from two years earlier and rising faster than overall mortgage foreclosure rates, according to real-estate analytics firm Attom. 

HOA assessment lien foreclosures present significant legal, financial, and procedural issues for both HOAs and owners. 

Having represented developers, HOAs, owners, and finance partners in both residential and commercial developments, now is the time to put money aside in the budget to compile a checklist of documents that should be reviewed and engage in a meaningful review process. 

For HOAs and owners alike, it is recommended to review: governing documents and authority, rules, notice and procedural requirements, lien validity and priority, financial and assessment reviews, reserve accounts, foreclosure process, risk mitigation and resolution options.

HOA assessment lien foreclosure rules vary significantly by state. The rights, obligations, timelines, and procedural requirements may differ materially depending on the jurisdiction in which the property is located. Both HOAs and owners should obtain state-specific legal advice before proceeding with or responding to an assessment lien foreclosure.