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Will My Condo Association Get Anything if They Foreclose On Me?

- Monday, October 01, 2012

What happens when my condominium owners association records a lien against my unit? Can the condo association foreclose on that lien and still expect to recover anything if there are other previously recorded liens?

Before we address these questions, it might be beneficial to briefly review what a lien is, what it does, and how it can impact a homeowner’s ownership rights to his or her property.

Simply put, a lien is a document that memorializes a debt, using the property as collateral for repayment of the debt. In other words, the property acts as a security for money owed. The general rule of lien priority is that once a lien is recorded, it becomes next in line to any previously recorded lien in terms of lien status. So, in most cases, a lien against real property has priority based on the date it is recorded.

The most common kind of lien on a home relates to money borrowed against the home, such as a mortgage taken out to purchase the home, or a Home Equity Line of Credit (HELOC). However, in the context of condo liens in Washington state, if a condo owner fails to pay his/her condo assessments (or fees), a lien will be created automatically for the amount owed.

Under Washington’s Condominium Act, any condominium owner’s association (COA) created after July 1, 1990, will be provided additional protections for condo liens, and such liens are given a “super-priority lien” status. The super-priority lien has priority over mortgages or any other liens, provided that the assessments were due during the six months immediately prior to the date of a trustee/sheriff’s sale. COA’s formed before July 1, 1990 may also avail themselves of the “super-priority lien” protection by amending or modifying the condo declaration to incorporate priority lien language.

Thus, the lien priority hierarchy under the Condo Acts looks something like this:

  1. Government liens for unpaid taxes;

  2. Association lien for the most recent six months’ delinquent assessments prior to trustee/sheriff’s sale;

  3. Mortgages and other liens according to the date they were recorded; and

  4. The remaining amount of the association’s lien.

However, this super-priority lien status only applies if the condo association initiates a judicial foreclosure, i.e. a foreclosure that is processed through the court. If the association forecloses its lien non-judicially, the lien no longer has super-priority over previously recorded liens.

In sum, a condo association can attempt to foreclose on its super-priority lien by filing a judicial foreclosure lawsuit against the homeowner and the beneficiary of the deed of trust (the bank). Usually, the bank will defend the lawsuit and try to arrange to pay the COA’s super-priority lien in effort to reestablish the bank’s senior lien priority.

So, in the context of a short sale, a lien on the condo recorded by the condominium owners association makes the short sale process more complicated. For this reason, we almost always advise our clients to stay current on their COA dues/assessments, to avoid a situation where the COA forecloses on the condo unit.  

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