Can you HOA foreclose on your property if you do not pay your HOA dues?

Theoretically, it could, but this is usually not the case.

Priorities of the interest in real property are generally determined by chronology, first in time, first in right. The Covenants, Conditions, and Restrictions (CC&Rs) are created and filed when the developer initially develops and creates the planned subdivision. This occurs before any of the lots within the subdivided land are sold. All of the lots within the community are bound by the terms of the CC&Rs, which set up and delineate the terms of the Home Owners Association (HOA).

To enforce an interest in property, a lienholder may foreclose when a property owner fails to meet his or her obligations . When a lienholder forecloses, this action wipes out the property interests of all junior lienholders. Because the CC&Rs were recorded before any of the properties were individually sold, the HOA’s lien is superior to any mortgage interests on the individually purchased properties. If there were to be no modification in priority, then an HOA’s lien would remain superior and any foreclosure action by the HOA would wipe out later-in-time liens. (Note that there are some liens that retain their superior position, including tax liens).

However, CC&Rs usually contain what’s called a subordination clause. This clause expressly states that the lien by the first mortgagee is superior to that of the HOA’s lien. This is done to permit future property owners to obtain financing to purchase property in the subdivision.

Lenders would not be very enthusiastic about lending on properties where an HOA had the ability to foreclose and thus eliminate the lender’s lien. The effect is that the first mortgage lender has priority, and the HOA lien is eliminated if and when the first mortgagee forecloses on the property.

If there is no subordination clause in the CC&Rs, the lender will ask for the HOA to agree to a subordination clause before financing the property. Likewise, if you apply for a second loan, that lender will also request for a subordination agreement from your HOA. The CC&Rs may have been drafted to include a required fee and/or a requirement that all dues be brought current before agreeing to the subordination agreement.

While the HOA does have lienholders’ rights in regards to your property, it is usually not the case that the HOA is in a position to foreclose on the property.