HOA Liens and Foreclosure Implications
- Lien Authority: Under the Colorado Common Interest Ownership Act (CCIOA), homeowners associations (HOAs) can place liens on properties for unpaid assessments.
- Foreclosure Rights: HOAs have the legal authority to foreclose on these liens, potentially leading to the sale of the property to recover owed dues.
- Super Lien Priority: Colorado law grants HOAs a “super lien” status for up to six months of unpaid assessments, which takes priority over first mortgages. This priority is limited to six months of assessments; additional amounts owed (like fines or attorney fees) are subordinate to the first mortgage.
Recent Legislative Changes
- House Bill 24-1158 (Effective October 1, 2024):
- Establishes a minimum initial bid amount for HOA foreclosure sales to prevent properties from being sold significantly below market value.
- Requires HOAs to inform homeowners about available credit counseling services before initiating foreclosure proceedings.
- Limits the recoverable attorney fees in HOA foreclosure actions to $2,500.
- House Bill 24-1337 (Effective August 7, 2024):
- Prohibits HOAs from commencing a judicial foreclosure to collect assessments unless specific criteria are met, including obtaining a personal judgment against the owner.
- Creates a 180-day right of redemption for homeowners after an HOA foreclosure sale, provided they file an affidavit of intent within 30 days of the sale. Altitude Community Law
Short Sales and HOA Liens
- Impact on Transactions: HOA liens can complicate short sales, as the HOA must agree to accept a reduced payment. Without this agreement, the short sale may not proceed.
- Negotiation Necessity: Successful short sales often require negotiation with the HOA to resolve outstanding liens, as these liens are not automatically extinguished in a short sale scenario.
- Early Engagement: Initiate discussions with the HOA early in the short sale process to understand the outstanding dues and negotiate potential settlements.