Should HOAs file liens?
I’ve written before about the lien procedure required when a homeowner’s association is attempting to collect on past due assessments. Some of the HOAs I’ve worked with have annual assessments as low as $50, but still have a handful of people who neglect or refuse to pay. My staff is trained on the process of organizing and filing liens, allowing me to supervise the work and figure out what to do if something comes up that is not typical of most of the liens we file. This keeps legal fees down, but my bill can still be considerably more than the overdue assessment. I frequently tell all my clients to consider their cases from an economic and business perspective, even if they have a personal injury or emotional claim. I will tell them I don’t want to charge them more for legal work than they may receive in a settlement or verdict. Why then, do I advise my HOA clients to file liens even when my fees, as low as they are, may still be more that the amount they are trying to recover?
First, the legal fees are low enough that a worst case scenario, no recovery, will not cause any hardship on any medium to large sized organization. The legal fees get even lower where I have several liens to file at the same time.
Second, in my experience, a large number of the unpaid assessments come from simple neglect. Even where a homeowner has received multiple letters from the HOA board and ignored them, there is something about a legal document, on file with at the courthouse, which will shake the procrastinating homeowner out of their stupor. In my experience, over half the time my office gets a phone call asking how much to pay and where to send the check.
Third, if the HOA declines to enforce their assessments, more and more people will ignore them. That causes a situation where a group of homeowners are essentially making voluntary payments to fund an entire planned community. A question arises if the board is fulfilling the duties that are required under the statute.
Fourth, once a lien is in place, it will remain for three years. During that time, any sale or refinancing of the home will be held up until the lien is satisfied. Therefore, in many cases, the liens are paid automatically in a closing.
Finally, unlike most legal actions, reasonable attorney’s fees are recoverable for the filing and enforcement of a lien.
While, there will no doubt be judgments for assessments and attorney fees that are simply not collectable, it is well worth it for a homeowners association to at least file the liens on unpaid assessments. If the lien is not satisfied after the three years, action must be taken by the HOA to enforce the lien. As that would require far more legal fees than the filing of the lien, another analysis must be made by the attorney and the board before taking that step.
–Bradley A. Coxe is a practicing attorney in Wilmington, NC with Hodges & Coxe PC who specializes in Personal Injury, Medical Malpractice, Homeowner's Associations, Contract and Real Estate disputes and all forms of Civil Litigation. Please contact him at (910) 772-1678.