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Why does a property lien not take first position over a mortgage?

Posted on Sun, Sep 16, 2012 @ 08:25 AM
I was surprised to learn that when an HOA files a lien against an owner's property for failure to pay their HOA fees, the lien does not take precedence over the 1st or 2nd mortgage. If you obtain a loan to purchase an automobile, take that automobile to a repair shop, and then refuse to pay the mechanic, he can file a lien against your car which is superior to that of the lender's lien. Similarly, if you hire a contractor to perform repairs on your home and then fail to pay him, he can also file a lien against your property which is superior to that of your mortgage lender. Why does this not hold true for HOAs? What can be done to change the law?

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In some states it does - those states are referred to as "super lien" states. If your state isn't one of them, check your state's website for pending legislation - it's quite possible that your state WILL become a super lien state. 
I subscribe to state and regional HOA and COA organizations; they are great reference points and generally keep members informed about new or pending legislation such as super liens and other legal issues. I'd suggest checking with such an organization, first.

posted @ Sunday, September 16, 2012 8:47 AM by merge

1. Check your legal documents. Some Condominium builders required builders to give the mortagee priority over all liens. 2. I am in a "Super Lien" state Washington. State Law gives us authority to collect 6 months back dues under specific circumstances. That 6 months is paid before other lien holders can collect. Anything beyond 6 months we lose.

posted @ Sunday, September 16, 2012 9:10 AM by Don

Reference to 1st mortgage, 2nd mortgage comes from their positions as liens. Usually liens are recorded in a time order. Some states provide exception from this law. For example "mechanics lien" in some states become superior to all other liens. Mechanics liens are those that are filed by contractors for unpaid work done on you house.

posted @ Sunday, September 16, 2012 10:46 AM by Jeff Ross

Unfortunately there are not that many super lien states. I think the whole thing could be solved if mortgage companies would simply escrow HOA fees like they do taxes and hazard insurance. It's not fair for the HOA to provide services in good faith and the owners take those services then get out of paying simply because their mortgage is probably more than their delinquent HOA fees. Unfortunately your state legislature passes the laws for super liens and if it was a priority for them, more states would have them.

posted @ Sunday, September 16, 2012 10:56 AM by Kathy

How do the rules fit in with the declaration and by-laws? This is, from what I understand in regards to the order of how the condo laws operate: the state, the condo declaration, the by-laws, then the rules. Therefore, the by-laws define the declaration, and the rules define the by-laws? How does one change the rules? Rules should only regard administrative aspects of the by-law - what does it mean by administrative?

posted @ Sunday, September 16, 2012 11:35 AM by Debra

I really like Kathy's suggestion that mortgage companies that escrow property taxes be required to escrow HOA fees as well. The practice of escrowing varies by state, however. Regarding Debra's comments - bylaws never "define a declaration." The governing documents are often referred to as the "declaration" "Covenants, restrictions and conditions" or "bylaws." Most states require the restrictions attaching to the real property to be recorded in the same place as the deed. The rules of an association may be derived from the recorded governing documents. For example, the gov docs may say - hours and conditions for use of the pool will be set forth by resolution of the board, or established by a vote, etc. The rules would set forth the hours and schedule of use. The rules are based on the gov docs.

posted @ Sunday, September 16, 2012 12:03 PM by Joyce Murray

While on the subject of association rules, it is important to note the hierarchy of governing authority for community associations. In Florida, they are, in order of greatest to least authority,  
1) Federal Law,  
2) State Law,  
3) Local Ordinances, 
4) Declaration of Condominium (or Covenants for a homeowners association), 
5) Articles of Incorporation,  
6) Bylaws,  
7) Rules and Regulations and  
8) Robert’s Rules of Order. 
Thanks, Randi

posted @ Sunday, September 16, 2012 1:04 PM by Randi

I am also from the state of Washington and have learned a bitter lesson about the state's laws on condo association arrears. Not only do the mortgage companies take priority on the lien but the state also feels the association should continue to provide free utilities (this includes the luxury of cable tv) to the dead-beat homeowner. The BOD is not allowed to turn off the utilities (gas, cable tv, and water in our case) but to continue providing them free of charge. That, coupled with the state's laws on forecloser, means that our board has had to provide up to 2 to 3 years of free utilities before the homeowner finally gets kicked out. This, in essence, means that the other homeowners get to foot the bill for the dead-beats, thanks to the state. I know for sure that the single mom living next door to me would never agree to pay for someone else's amenities nor would the elderly lady in the complex who is taking care of 3 disabled family members. Thanks State of Washginton, you really thought this one out well.

posted @ Sunday, September 16, 2012 2:12 PM by Renee

After re-reading my response it appears that I strayed from the original question. Ignore my rant and focus on the other replies. (I remain mad at the state, however).

posted @ Sunday, September 16, 2012 4:17 PM by Renee

To Renee: I feel your pain! We have the same situation for 4 years and this owner has filed bankruptcy 2 times which put everything on hold until they were dismissed because she would not follow the plan and now finally discharged. Last year she decided to stopped paying her mortgage, they responded to our filing and they now have 1st lien position and priority since their balance is larger and the foreclosure has been granted. Forget our legal fees and wasted time in mediation and the whole time we continued to provide water, trash, sewer, etc. She even had the nerve to get 2 attorneys (free of course since she claims to have no income yet she just bought a new car) and she's fired both of them because they have told her to settle with us and she refuses. To make a long story short, we have our judgment and we found out where she is working and we are going to garnish her wages. It's deadbeats like this that make me want to sell my unit (which I love) and move... but can't even do that because I'm underwater!

posted @ Sunday, September 16, 2012 9:38 PM by Kathy

I think a property lien is too drastic. I think a second home mortgage makes more financial sense. But that's just me, I haven't been in this position yet. http://www.firstmortgagecompany.net/process.php

posted @ Monday, July 21, 2014 9:06 PM by Brittany Matthews

Mortgage and debt can really add up! It's sad when a reversal in fortune makes this a problem. Then again, sometimes it could have been avoided. 
Anita Mas | http://www.firstmortgagecompany.net/process.php

posted @ Monday, July 21, 2014 9:08 PM by Anita Mas

That is a really great question, and I don't have the answer. I would recommend calling a mortgage lender to help you out. They'll be able to give you all of the details about the trends in today's economy. http://www.paramountmortgagelender.com

posted @ Thursday, September 18, 2014 2:36 PM by Talmage Dangerfield

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