As an attorney who interacts regularly with homeowners in some stage of default, I encounter HOA arrearages on a fairly regular basis. When the default is long standing, some of these balances grow to truly outrageous amounts. The HOA, or their management company, will often add monthly late fees, collection fees, fees for each time they reach out or send a letter, attorney fees, legal costs and more. I’ve seen HOA default balances total up to FIVE times the amount of the missed regular payments in aggregate. In scenarios like that, I’m asked if the HOA has the authority to charge such usurious amounts. Unfortunately, they usually do.
When a community or builder/developer chooses to have an HOA there are documents in the chain of title establishing the rights and existence of the HOA and as such, they’re binding on homeowners in the community in the present and future. Accepting the decisions made by the HOA on fees, both standard and default-related, are part of the package deal when buying into that community.
When a balance goes unpaid for an extended period of time, the HOA can even make the decision to institute foreclosure proceedings. Such a foreclosure would be subject to any senior liens (meaning an outstanding mortgage would survive an HOA foreclosure and remain in place against the property), but many homeowners have built large amounts of equity in their home which makes the idea of allowing a foreclosure, HOA or otherwise, very unappealing. That creates a high leverage situation for the HOA where homeowners have both their property title and their equity in jeopardy pending the payment or settlement of the past due amounts. The HOA is usually able to parlay this leverage into a windfall recovery encompassing most or all of the aforementioned fees that have been stacked onto the bill.
It’s advisable for homeowners to think of their HOA obligations as nearly equivalent to their mortgage in importance and consequence. As with a mortgage, if a homeowner falls behind only a few payments and is able to catch back up quickly, the cost and negative consequences of the default will be tempered. If the default goes on 6, 12, 18+ months, the path forward escalates in difficulty and becomes progressively more punitive. It’s in the best interest of homeowners to keep their HOA dues up to date and paid, or it could balloon into a much larger problem for them down the road.
With this knowledge, now you can Rest Easy.