Real Estate Advisor

Real
Estate
Advisor
Chulak & Shiffman
Attorneys at Law

Q. The management company for our homeowner association has arranged to have an assessment lien placed on a home within our community as a result of delinquent assessments. What is a lien and what does it accomplish?

A. An assessment lien is a claim or encumbrance on the home of a member of your association placed by your association (as a creditor) in order to secure the debt owed to it.

The claim is created by recording a Notice of Delinquent Assessments or "lien" against the property in the county recorder’s office.

It is the association’s CC&Rs (Covenants, Conditions and Restrictions) that enable the association to record the lien as the result of the failure of the homeowner to pay assessments when due.

The recording of an assessment lien will accomplish the following for your association:

1) It will make it impossible for the homeowner or a mortgage lender to obtain title insurance, thus making it highly unlikely that the property can be sold or refinanced without first paying the full amount owing;

2) It will make the home collateral for the amount owing, thus giving the association the status of a secured creditor in the event that the debtor files for protection under the Federal Bankruptcy Act. This is superior to being an unsecured creditor in that it increases the probability of the association being paid; and

3) It accomplishes one of the necessary steps in the foreclosure process. As part of the collection process, homeowner associations may foreclose their lien, thus causing the home to be sold at a public auction for the purpose of generating the funds to pay the delinquent assessments, including collection costs.

In short, often the recording of a lien is sufficient action to get a homeowner who is delinquent to pay before additional collection action is taken.

Michael Chulak is a partner with Chulak & Shiffman, Attorneys at Law. Questions can be sent to 30343 Canwood St., Suite 203, Agoura Hills, CA 91301. Answers are general in nature. An attorney should always be consulted when legal advice is needed. For more information: www.mtclaw.com.