Condo dues lapse may prompt foreclosure

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Dear Dr. Don,
Can a homeowners association foreclose on a homeowner who has paid the mortgage in full but is late on payments for association dues?
— Gee Whiz

Dear Gee,
Staying current on the mortgage isn’t enough; you need to stay current on your homeowners association, or HOA, dues, too. It’s typical for a homeowners association to be able to pursue foreclosure on your property for the nonpayment of dues.

Reviewing your HOA documents will give you a better idea of what rights the association has in foreclosing on a property for the nonpayment of dues. Consult with an attorney if you’re in the position of not paying your HOA dues and the HOA can foreclose on your property.

The laws on this topic can vary by state. California, for example, passed a law (effective in 2006) which limited the right of a homeowners association to foreclose on a property.

Meanwhile, some states allow “nonjudicial foreclosures” when homeowners lapse on their dues. The HOA’s collection attorney will typically place a lien on the property and announce the property’s new legal status in the local newspaper. The home is then auctioned.

Affected homeowners typically get none of the due-process protections they could use to ward off their other creditors — no right to a hearing and no right to confront their HOA board. In contrast, a judicial foreclosure requires court action.

RealtyTrac’s Web page “Foreclosure Laws and Procedures By State” is no substitute for consulting with an attorney but does show which states have nonjudicial versus judicial foreclosures.

Read more Dr. Don columns for additional personal finance advice.