While the days of millions of foreclosures per year that started in 2008 have passed, thousands of homeowners face foreclosure each year. A small number of these come from HOA foreclosure.
What is HOA foreclosure, though, and what gives HOAs the same power banks use to recover debts? What rights do homeowners have during these foreclosure proceedings?
Foreclosure can intimidate homeowners and HOA boards, but the process doesn't need to confuse anyone. Keep reading for basic information on the HOA foreclosure process.
What Is HOA Foreclosure?
HOA foreclosure occurs when an HOA exhausts other means of recouping money owed by a homeowner and seeks to sell the home as a remedy. Such foreclosures, while rare, do fall under the range of tasks handled by HOA property management.
HOA Foreclosure Types
Homeowner rights in an HOA require a legal process for the HOA to initiate foreclosure. These legal processes fall under either judicial foreclosures or nonjudicial foreclosures.
Judicial Foreclosures
Judicial foreclosures require the filing of a lawsuit against the property owner. District or county courts can handle judicial foreclosure processes.
If the court finds in favor of the HOA, the local sheriff or constable will sell the property at auction and any money owed to the HOA will come from the proceeds of the sale. Other creditors will also receive any money owed from the sale of the property according to Texas's laws regarding creditor priority.
Non-Judicial Foreclosures
Expedited foreclosures can only occur when the HOA's governing documents allow them. During this process, the HOA seeks a court order to foreclose and then handles the sale without the aid of a sheriff or constable. The HOA must appoint a trustee, such as an association manager, to administer the sale.
Alternative Remedies
HOAs have many potential ways to get HOA fees, and foreclosure doesn't rank high. HOAs don't want to deal with owning and selling homes, even if Texas laws allow it. Other remedies include:
- Installment plans
- Sending the debt to a collections agency
- Placing an assessment lien on the property
HOAs must place a lien before initiating foreclosure. HOAs must outline processes for lien placement and HOA lien removal in their governing documents and do not always have the right to do so. Texas laws requiring the HOA to offer installment plans went into effect in 2012.
As such, residents have many options for preventing HOA foreclosure. Most choose to negotiate an installment plan or comply with the demands of a collection agency. If the homeowner finds that the HOA's covenants do not allow for a lien or foreclosure, they may also choose to fight the foreclosure in court.
Protecting Your Rights
Both homeowners and HOAs have rights during the HOA foreclosure process. Homeowners have many opportunities to make things right, but HOAs have the right to receive the money the homeowner owes. While foreclosure serves as a last resort, it ensures that HOAs get paid.
When you deal with complex issues like HOA liens, you want a trustworthy partner. At PMI Bluebonnet Realty, we offer HOA management services including a diverse range of support products and the trust that comes from a veteran-operated company. If you need guidance on the next steps for your HOA, schedule a consultation today.
