HOA Foreclosures for CC&Rs Violations

By Amy Loftsgordon, Attorney
If you own property in a neighborhood that has an HOA and you don’t follow the community’s Covenants, Conditions, and Restrictions (CC&Rs), get ready for fines and maybe a lawsuit or foreclosure.

If you buy a home that’s part of a planned unit development, you’ll automatically become a member of the homeowners’ association, known commonly as the "HOA." As a member, you agree to follow the terms and conditions set out in the HOA’s governing documents, including the Declaration of Covenants, Conditions, and Restrictions (CC&Rs). The CC&Rs describe how you can use your property, by setting out requirements (such as you must keep your garage door closed except when entering and exiting the garage) and limitations (like you can’t leave your garbage cans at the curb unless it is trash day). The bylaws, on the other hand, govern how the HOA runs as a business. For example, the bylaws will state how often the HOA holds meetings. Basically, if your dispute is about what you can (or can’t) do with your property, it involves the CC&Rs. If your dispute is about how the HOA is governed, the bylaws are involved. If you don’t follow the CC&Rs, the HOA can fine you and, if you don’t pay, sue you to collect the amount you owe. If they win and you still don’t pay, the HOA might be able to foreclose your home to satisfy their money judgment.

HOA Overview

People who live in a planned development are usually part of an HOA, which is a non-profit corporation that is responsible for managing and maintaining the community. The HOA has a lot of power over the homes and homeowners in a planned community. For example, the HOA determines how much members have to pay in assessments and collects those assessments. The HOA also creates and enforces a variety of documents, including bylaws, CC&Rs, and, sometimes, less formal rules and regulations.

Typical CC&R Provisions

The CC&Rs describe the requirements and restrictions on how homeowners use their properties. The CC&Rs often set standards for:

  • How you maintain your home. For example, you might have to routinely mow your lawn and make sure that the paint doesn’t start to peel off the exterior of your house. (Some HOAs provide lawn care and home maintenance services, like exterior painting, while other HOAs expect homeowners to do these things themselves.)
  • How you decorate your home. The CC&Rs might limit the color you can paint your home. Some HOAs limit homeowners’ color choices to various shades of brown or gray.
  • The type and number of pets you can own. Some CC&R’s ban certain pets—like livestock or certain dog breeds—or limit the number of pets you can own.
  • Where you park. CC&Rs sometimes prohibit vehicle parking on the streets and limit overnight guest parking.
  • How you store your trash or other unsightly items. The CC&Rs might require that trash containers, utility meters, and clothes lines be enclosed or appropriately screened from view.
  • Other requirements. The CC&Rs could restrict the height of your fence, require a defensible space for fire protection, or prohibit political signs, among other things.

When you buy a home in an HOA community, you typically get a copy of the CC&Rs to read before finalizing the sale. CC&Rs vary among different communities, so make sure you read this document carefully before you buy a home in a community that has an HOA.

Mild Responses to CC&R Violations

If you violate the CC&Rs—for example, you paint your mailbox an unapproved color—you’ll probably get a few notices telling you to repaint the mailbox. If you don’t repaint it, the HOA might take one or more of the following steps:

  • assess a fine against you for each day you don’t fix the problem (for example, $100 per day)
  • go on your property and correct the issue (and charge you for the cost of repainting the mailbox), or
  • suspend your privileges to use the common facilities, like the community pool or gym, until you take care of the matter.

If you don’t correct the problem or the HOA doesn’t fix it for you, the HOA might file a lawsuit against you asking the court to order you to repaint the mailbox. The HOA might also ask the court for a money judgment against you for any unpaid fines. Once a court issues a money judgment in favor of the HOA, the HOA can usually take money from your bank account or garnish your wages to collect the amount owed. But that’s not the only route the HOA might take to satisfy your debt. It can also place a lien on your home and, possibly, foreclose it.

Drastic Responses to Unpaid HOA Fines

When a homeowner doesn’t pay an HOA-imposed fine, the organization might have the option to place a lien on the owner’s property, if state law allows it. An unpaid fine does not automatically become a lien (this differs from unpaid assessments, which will automatically become a lien). But before the HOA can place a lien on the home, it has to first file and win a lawsuit against you in court. After getting a money judgment from the court, the HOA can record that judgment in the county records as a lien against your property. Then, depending on state law and the HOA’s governing documents (see below), the HOA might foreclose that lien.

Even in states that allow liens for unpaid fines, the law might allow such liens only under specific circumstances, such as when the unpaid fines are more than a certain threshold. For example, in Florida, fines must be at least $1,000 or they can’t become a lien against the property.

Foreclosures for Unpaid Fines

When a creditor places a lien against real property, the lienholder might foreclose the lien. After giving the owner a chance to pay off the debt, it causes the property to be sold (the creditor satisfies the debt from the sale proceeds). The mechanics for foreclosing the lien depend on state law. In some states, the HOA files a lawsuit in court to foreclose (this is known as a judicial foreclosure). In other states, the HOA can choose to use a nonjudicial (out of court) process. In a nonjudicial foreclosure, the HOA follows the process described in the state statutes and the CC&Rs, such as mailing you a notice of foreclosure and publishing the notice in a newspaper.

Just as some states forbid liens for unpaid fines (see above), some also restrict (or prohibit) foreclosures when the HOA lien consists only of unpaid fines and related costs like attorneys’ fees. Here’s an example of a restriction: In North Carolina, the most common foreclosure method is nonjudicial. But under North Carolina law, an HOA can’t use a nonjudicial process to foreclose an HOA lien if the lien consists solely of fines, interest on unpaid fines, or attorneys' fees that are associated with fines. Instead, the HOA must foreclose judicially by filing a lawsuit. This gives the homeowner one last chance to convince someone (a court) that he doesn’t deserve to lose his home over a dispute with the HOA.

In Texas, an HOA can’t foreclose a lien at all (whether judicially or nonjudicially) that consists solely of fines and attorney's fees associated with those fines. However, as mentioned earlier, once the HOA gets a money judgment it can potentially take money from the homeowner’s bank account or garnish the homeowner’s wages. And, if the lien also includes other amounts besides fines and related attorneys’ fees, such as unpaid assessments, the HOA can probably foreclose.

Avoiding a Foreclosure

If you’re facing a potential foreclosure due to unpaid HOA fines, you might be able to ask for—or the HOA might require—a pre-foreclosure meeting to discuss the violation. At the meeting, you might be able to negotiate a resolution to the problem, such as agreeing immediately to begin a payment program to pay off your fines in exchange for the HOA’s agreement to hold off on foreclosure.

Getting Help

If you aren’t able to work out a deal and the HOA starts a foreclosure, consider contacting a foreclosure lawyer to learn about different options.

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