Filing a lien and pursuing a civil action are two options available to associations for collecting unpaid assessments and fines from delinquent lot owners. For associations that elect to file a lien, the next step when the owner continues to refuse to pay is foreclosure. Foreclosures can be expensive and time-consuming if the lot owner contests the proceedings or appeals the orders entered by the Clerk of Court to Superior Court. Therefore, it is critical that association boards carefully evaluate this option before electing to pursue this remedy.
If there is a deed of trust, judgment lien, or other encumbrance on the property prior in time to the recorded association lien, the decision becomes more difficult. Foreclosure of the association lien would result in sale of property subject to any superior liens of record. Whether the property would bring a reasonable sale price at the foreclosure sale depends in part on the balance owed on any superior liens.
If the property is free of other encumbrances and has a value of at least $15,000 to $25,000 more than the amount of the assessments owed, foreclosure of the association lien may be a good decision. The association will have to advance funds for the cost of the foreclosure proceeding but would be entitled to recoup those expenses from the proceeds of the foreclosure sale. The association is permitted to bid at the foreclosure sale in order to protect its investment in foreclosure costs.
If you have unpaid assessments, contact Bill Cannon or Martha Bradley to discuss the best option available for your situation.