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The Pitfalls of not Paying your Home Owner Association Assessments


With the traumatic rise of homes falling into foreclosure and many homeowners filing for bankruptcy, it may seem like the current financial crisis is a storm with no end in sight. For many Arizona real estate law clients at the Heckele Law Firm, a question that often comes up is the consequence of not paying Homeowners Association (HOA) assessments. As if the burden of mortgage payments and associated late fees weren’t enough, the additional liability of HOA dues adds further financial stress to an already tense situation. While the consequences of not paying your assessments can range from a lawsuit and lien to foreclosure, there are several options available to you to deal with your unpaid HOA assessments in the face of impending foreclosure and/or bankruptcy.

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Why are your HOA Rules critical?

HOA Liens & Foreclosures


Just like your mortgage holder, an HOA may place a lien against your home for unpaid assessments, late fees, and collection fees under Arizona Revised Statutes (A.R.S.) § 33-1807. However, under that same statute, an HOA can only foreclose on your home if you are either (a) more than one (1) year overdue on assessments, or (b) you owe more than $1,200 in assessments.


A couple of important things to note when it comes to HOA foreclosure:


1)    The $1,200 minimum applies only to your assessment principle and is exclusive of reasonable collection fees, late penalties or attorney fees.

2)    Any monies paid by a homeowner are to be first applied to the principal balance and then to any unpaid fees or penalties

3)    The HOA must provide you with a written statement showing any unpaid assessments on your property with 15 days of your written request.

4)    Unlike a bank, the HOA must bring a lawsuit against you to initiate foreclosure; a lengthy process, giving you more time to bring your debt to good standing.


Some Arizona homeowners in default are dealing with multiple liens from more than one lender in addition to their HOA. With real estate values as low as they are, your house is likely worth a lot less than the balance owed on your mortgage. Some homeowners incorrectly assume that the difference at foreclosure will effectively cancel out any HOA recourse and so they stop paying their dues.


While it is true that foreclosure will wipe out an HOA lien held against the property, it is not the only recourse HOAs have to recover funds from you. Even after foreclosure, most Covenant, Code & Restrictions (CC&Rs) agreements allow the HOA to bring further legal action against you personally, which may include garnishing your wages, tax return, and bank accounts.


If your HOA or former HOA has initiated legal proceedings against you, the attorneys at Harlow Spanier & Heckele, PLLC may be able to assist you.  Mention this blog article for a free consultation.


Your HOA responsibilities in the face of Bankruptcy


Yes, filing for Chapter 7 or Chapter 13 bankruptcy may relieve you of HOA debts before the filing date, but typically not those assessments levied afterward. If you do declare bankruptcy before foreclosure is finalized it may actually do more harm than good, as your lender will have to lift the automatic stay to proceed with foreclosure. This delay will prolong the amount of time you’ll be responsible to pay your HOA dues.


In addition, using bankruptcy to delay the foreclosure process may be a dangerous proposition in Arizona; courts see this all the time and have a “zero tolerance” for this kind of “frivolous” behavior. You may be faced with lawsuit brought against you by the Department of Justice for abusive filing.  So, before filing bankruptcy blindly, those suffering from financial obligations should consult with an attorney to understand their options and to avoid potentially harmful missteps.


In the wake of the latest financial crisis, people are faced with myriad legal questions with respect to what their best options are.  The attorneys at The Heckele Law Firm are dedicated to helping our clients make sound legal and business decisions.  Our goal for clients is to weather the storm, because clear skies are up ahead.  If you need some help navigating your life, please give us a call.


Please note that the preceding information is informational only, and it is not intended to be legal advice. If you need assistance, call the experienced Arizona attorneys at Harlow Spanier & Heckele to schedule a consult at (520) 369-4274 or email [email protected].

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