Homeowner associations can be a great mechanism for reducing individual owner responsibilities, elevating neighborhood appearances, improving amenities and increasing property values. They can also foreclose on your home - under the right circumstances.
Under section 38-33.3-316 of the Colorado Common Interest Ownership Act (“CCIOA”), HOAs have the authority to place a lien on a unit owner’s property if that owner’s account with the association becomes delinquent for failure to pay assessments. Unless the declaration otherwise provides, fees, charges, late charges, attorney fees, fines, and interest charged pursuant to CCIOA, are enforceable as assessments.
A lien under section 38-33.3-316 is prior in priority to all other liens and encumbrances on a unit except:
- Liens and encumbrances recorded before the recordation of the declaration and, in a cooperative, liens and encumbrances which the association creates, assumes, or takes subject to;
- A security interest on the unit which has priority over all other security interests on the unit and which was recorded before the date on which the assessment sought to be enforced became delinquent, or, in a cooperative, a security interest encumbering only the unit owner's interest which has priority over all other security interests on the unit and which was perfected before the date on which the assessment sought to be enforced became delinquent; and
- Liens for real estate taxes and other governmental assessments or charges against the unit or cooperative.
Interestingly, recording of the declaration constitutes record notice and perfection of the lien. No further recordation of any claim of lien for assessments is required. The association will also be entitled to costs and reasonable attorney fees incurred by the association, in a judgment or decree in any action or suit brought by the association under section 38-33.3-316. While the association has six years within which to initiate proceedings to enforce a lien after the full amount of assessments becomes due, if they fail to do so, a lien for unpaid assessments is extinguished.
Upon request, the association must furnish to a unit owner or such unit owner's designee, delivered personally or by certified mail, first-class postage prepaid, return receipt, to the association's registered agent, a written statement setting forth the amount of unpaid assessments currently levied against such owner's unit. The statement shall be furnished within fourteen calendar days after receipt of the request and is binding on the association, the executive board, and every unit owner. If no statement is furnished to the unit owner or holder of a security interest or his or her designee, delivered personally or by certified mail, first-class postage prepaid, return receipt requested, to the inquiring party, then the association shall have no right to assert a lien upon the unit for unpaid assessments which were due as of the date of the request.
In a condominium or planned community, the association's lien may be foreclosed in like manner as a mortgage on real estate. The exception is that the association may only foreclose on the lien if: 1) the balance of the assessments and charges secured by its lien equals or exceeds six months of common expense assessments based on a periodic budget adopted by the association; and 2) the executive board has formally resolved, by a recorded vote, to authorize the filing of a legal action against the specific unit on an individual basis. The board may not delegate its duty to act to any attorney, insurer, manager, or other person, and any legal action filed without evidence of the recorded vote authorizing the action must be dismissed. No attorney fees, court costs, or other charges incurred by the association in connection with an action that is dismissed for this reason may be assessed against the unit owner.
This article should serve as a reminder to ensure that your current contact information is on file with your homeowners association. Making sure that you are receiving all notices and communications from your association is the first step to avoiding delinquency and the possibility of subsequent attachment of liens.
For more information please refer to section 38-33.3-316 of the Colorado Common Interest Ownership Act.