It is a problem we see often in our office. An owner withholds paying HOA assessments on the grounds that the Association is somehow failing to perform its duties and obligations under the governing documents. Although their actions may seem justified, owners need to understand that these withholdings are not allowed under Oregon law, and it usually ends with the owner paying the association additional hundreds to thousands of dollars in interest and late fees, plus the Association’s collection and legal fees. A lien will also likely be placed on the owner’s property.
Oregon Revised Statutes (“ORS”) 94.704(10)(b) (Planned Communities) and ORS 100.530(2) (Condominiums) specifically prohibits an owner from offsetting an assessment when an association fails to preform its duties and obligations. Similar language is also usually in an Association’s CC&Rs or other governing document. When assessments become delinquent, ORS 94 and ORS 100 allows for an automatic lien to be placed on the owner’s property, and the lien may also include the interest, late charges, and collection and legal fees incurred by the association. Association’s may also petition the Court for a court-ordered judgment and garnishment against the owners’ wages or funds to pay that judgment, and/or to foreclosure against the owners’ property for the unpaid lien.
What can an owner do if they find themselves in this type of situation? First, read the governing documents! Governing documents usually (and should) have notice requirements and allow the owner an opportunity to be heard before levying any fines against the owner’s property. Associations are also required under ORS 94 and ORS 100 to provide at least 10 days written notice before initiating any type of judicial or administrative proceeding against an owner. If these notice and hearing requirements under the governing documents or ORS are not followed, the owner may have a defense against the association.
Governing documents should also state the amount of interest and fines the Association is allowed to collect for delinquent assessments, and the number of days an owner has to make themselves current before their account is deemed delinquent.
Now the big question… If the owner is not allowed to withhold assessments, what rights does an owner have when an association fails to perform its duties and obligations? An exact answer to that will vary depending on the situation, but in general, owners do have a right to bring a breach of contract or breach of fiduciary duty claim against an Association. Discussing these concerns with an experienced attorney that specializes in condominiums or homeowner associations is a good place to start.