Every homeowners and condominium association relies on assessments in order to operate. Assessments pay for insurance, maintenance, management, and other services necessary for an association to run properly. When owners don’t pay their assessments, the board has a duty to pursue collection efforts. There are two separate avenues for collecting delinquent assessments: 1) foreclosure of the association’s lien; and 2) a personal judgment against the owner for the amount of the assessments.
Liens
Most governing documents provide for an automatic (by operation of law) lien placed on the owner’s property the moment the assessment is delinquent. State law in some jurisdictions may also provide for an automatic lien. For planned communities in Oregon the statute reads:
(1) Whenever a homeowners association levies any assessment against a lot, the association shall have a lien upon the individual lot for any unpaid assessments. The lien includes interest, late charges, attorney fees, costs or other amounts imposed under the declaration or bylaws or other recorded governing document. (ORS 94.709)
Oregon condominiums have a similar statute:
(1) Whenever an association of unit owners levies any assessment against a unit, the association of unit owners shall have a lien upon the individual unit and the undivided interest in the common elements appertaining to such unit for any unpaid assessments. (ORS 100.450)
And lastly, Washington’s automatic lien statute for condominiums states:
(1) The association has a lien on a unit for any unpaid assessments levied against a unit from the time the assessment is due. (RCW 64.34.364)
However, it’s a good policy to always record a formal paper lien. The lien is always filed in the recorder’s office of the county where the property is located.
Typically, association liens are superior to all other liens except for first mortgages and deeds of trust, and tax liens. This means that if the association decides to foreclose its assessment lien, it does so subject to any first mortgages or tax liens. If there is little equity in the owner’s property, then foreclosing the association’s lien may not be the best choice.
Personal Judgments
Aside from the association’s lien rights, the delinquent owner remains personally liable for the assessments. (ORS 100.475, 64.34.364( 8)) Even if the owner sells the property in your community and moves elsewhere, their personal obligation to pay the balance remains. This is true even if the property was foreclosed.
To secure a personal judgment, a lawsuit must be filed. The lawsuit must be personally served on the owner, and the owner has an opportunity to file a written response. The written response is called an “Answer.” For a timeline of the collections process, click here.
If the owner fails to file an Answer, the association can ask the court for a default judgment. Once the judgment is received the association may begin collecting on the judgment through garnishment of wages or bank accounts, filing a writ for the owner’s personal property to be sold at a sheriff's auction, or other legal procedures until the judgment is paid in full.