If your homeowner’s association decides to foreclose on your home because you have a significant outstanding balance on your HOA fees and assessments, you may assume that you are off the hook for the future financial liability of assessments. Unfortunately, you would assume wrong. According to the Homeowners Protection Bureau, LLC, the person or entity that owns a home has full responsibility for all assessments that come due during his, her or its time of ownership. This is the case regardless of how said person or entity acquired the property. It is also the case regardless of if the current owner abandons the property or if the HOA decides to suspend or waive fees. The bottom line is that you are legally obligated for any and all fees that come due until the title of your home transfers to another person or entity.
Joint and several liability for assessments on a foreclosed home
In some cases, the purchaser of a foreclosed home may decide to pay the full amount due in order to clear the home’s title. However, if he or she does not, he or she assumes joint and several liability for all assessments that came due prior to the transfer once the transfer takes place. If the lender acquires the title through foreclosure, though, it is only liable for either 12 months’ worth of assessments or 1% of the mortgage amount, whichever is less.
What becomes of assessments once your home sells
If your home sells and the bank does not have to assume liability for your past due assessments, the HOA can apply the proceeds from your home toward your assessments. However, it can only do so if the proceeds are sufficient to pay off the existing mortgage. If the proceeds are enough to pay off the existing mortgage and your assessments, you are free of your legal liability to pay the assessments.
Unfortunately, your responsibility for past due HOA fees and assessments does not disappear once the foreclosure proceedings begin. This is just one example of why it is important to fully understand your rights and responsibilities.