Board members and homeowners must familiarize themselves with the process for HOA foreclosure in Virginia. In doing so, board members can follow due process and protect the association from liability. Meanwhile, homeowners can understand their rights and preserve them.
HOA Foreclosure in Virginia: Is This Legal?
Homeowners associations collect regular dues or assessments from members. When members fail to pay these dues, they can face a number of possible consequences. One of these consequences is foreclosure.
In Virginia, as per Section 55.1-1833, associations can place a lien on the home of a delinquent homeowner. To perfect this lien, the association must file a memorandum of lien in the clerk’s office in the city or county where the association is located. The association must accomplish this within 12 months from the due date of the assessment.
Before filing the lien, the association must first inform the homeowner. It must provide written notice of the lien, via mail, at least 10 days before filing.
Condo associations have the same power in Virginia as per Section 55.1-1966. A COA can file a lien in the same way as a homeowners association if an owner fails to pay their dues and assessments. The difference is that a condo association must record the lien within 90 days from the due date of the assessment.
Failure to resolve an assessment lien can lead to foreclosure. Associations must follow specific procedures to foreclose on a home, but losing one’s home is a real possibility in delinquency.
Understanding Virginia HOA Foreclosure Laws
Can an HOA foreclose on a home? The short answer is yes. In Virginia, both homeowners associations and condo associations can foreclose on a house after recording a lien.
Associations may foreclose on liens nonjudicially. This means that an association may foreclose without filing a case in court. That said, judicial foreclosures, which require court supervision, are also permitted in the state of Virginia.
Additionally, associations can proceed with foreclosure if the combined amount of one or more liens is over $5,000, not including attorneys’ fees or costs. This is under Sections 55.1-1833, 55.1-1966, and 8.01-463 of the Virginia Code.
What is the HOA Foreclosure Process in Virginia?
To foreclose nonjudicially, associations must follow the procedures and requirements below.
1. Provide Notice of Preforeclosure
Before starting foreclosure, an association must send a notice to the owner.
This notice gives at least 60 days to pay the outstanding debt and warns that the property could be sold if payment is not made. It must also inform the owner of their right to file a lawsuit disputing the debt or to present a defense against foreclosure.
Once the 60-day period ends without payment, the association may appoint a trustee to carry out the sale.
2. Publish the Foreclosure Sale
Associations must publish the details of the sale in a newspaper once a week for four weeks. This includes the time, date, and location of the sale.
If the property is within a city or an adjacent county, the association can instead publish the notice on five separate days. These days can be consecutive.
Then, the sale must take place on a date after the final advertisement. It can’t occur sooner than eight days after the first notice or later than 30 days after the last.
3. Provide Notice of the Sale
The association must also send the owner a copy of the sale notice or the published advertisement. The association can mail this notice via certified or registered mail.
If the association chooses to mail the notice, it must do so at least 14 days before the scheduled date of the sale. Alternatively, the association can also deliver the notice in person.
4. Offer the Right to Cure
As part of Virginia foreclosure protection, the owner has the right to stop the foreclosure by paying the overdue assessments. This payment must also cover all related costs, including advertising expenses and reasonable attorneys’ fees associated with the enforcement of the lien.
How Long Does it Take for a HOA to Foreclose?
The duration of the foreclosure process can vary from one association to another. In general, nonjudicial foreclosure can wrap up in as little as 60 days.
That said, filing delays, publication errors, and notice delivery delays can prolong the foreclosure. Some homeowners might also contest the foreclosure, which could stall the proceedings.
Can Associations Foreclose Even With an Active Mortgage?
Yes, associations can still foreclose on a home even if the owner has an active mortgage on it. In fact, despite being current on all mortgage payments, homeowners can still lose their home to HOA foreclosure in Virginia.
Understanding Lien Priority
The priority of liens determines the order in which creditors are paid after a foreclosure sale. It often affects whether they receive payment at all.
Liens usually follow the “first in time, first in right” principle, which means the lien recorded earliest in the land records takes priority over those recorded later. The lien with the highest priority receives payment first from the foreclosure sale proceeds.
If funds remain after the first lien is satisfied, they are applied to the next lien in line until it is paid. This then continues in order of priority.
Because of this setup, liens that are lower in priority may not receive payment to satisfy the full debt. They may not receive anything at all if the funds run out.
In Virginia, once an association perfects its lien, it generally takes priority over all other liens and encumbrances. The only exceptions are the following:
- Real estate tax liens
- Liens recorded before the community’s declaration
- Unpaid amounts on any mortgage or deed of trust recorded before the HOA lien was perfected (for HOA liens)
- Unpaid amounts on any first mortgage or deed of trust recorded before the COA lien was perfected, if held by an institutional lender such as a bank (for COA liens)
Do Liens Expire in Virginia?
In Virginia, an association must begin foreclosure proceedings or file a lawsuit to collect the unpaid balance within 120 months following the date of recordation for the memorandum of lien. Otherwise, the association will lose its chance to foreclose on the home.
Get Help With Virginia Foreclosure for Associations
Navigating foreclosures can be challenging for associations, especially for self-managed boards. One misstep can delay the whole process and even call the validity of the action into question.
National Realty Partners is a leading provider of association management services in Virginia. We can assist your board with foreclosure matters. Call us today at 703-435-3800 or request a proposal online to get started!
RELATED ARTICLES:
- Breaking Down Virginia HOA Laws
- How Important Is Condo Management To A Condo Community?
- Can You Refuse To Join A Homeowners Association?