Homeowner association members are moving targets. They buy, they sell. They come, they go. The buying and selling process involves what's called "closing." At closing, money is exchanged between buyer and seller, legal documents are signed, title insurance is bound and a myriad of other details are handled. Among these details should be applicable HOA business which includes money, rule violations and architectural design requirements. Yet, it's not uncommon for a seller to try to scoot away without paying a past due HOA balance or rectifying an architectural violation or two. Whether by innocent omission, ignorance or purposeful deceit, buyers, sellers, title companies, lenders and real estate agents often close sales without settling HOA accounts.
In defense of this shabby business is the fact that many HOAs are hard to find ... not by geographic location but by the identity of those in charge. Many HOAs fail to publish or withhold contact information for the Board and management. Posting an entry sign with this information solves this problem. Having an HOA website is even better because the website can and should contain much of the information required to have an informed closing.
Yet, often a closing takes place, a seller collects the proceeds and blows town without having paid a balance owing to the HOA. If the HOA has failed to file a lien on the owner's HOA property, the HOA can still pursue collection alternatives but they tend to be less likely to succeed and the collection agents like to take a big cut of the proceeds. With a properly filed lien, the HOA's debt will usually be caught by the title insurance company and get paid at closing.
There are, however, sales that may not include title insurance. Sales involving cash, tax sales by the IRS and those where the seller carries a contract and note are examples. While informed buyers always insist on title insurance, some don't know any better (or don't think it's important) and close the sale without it. These buyers purchase the property subject to existing liens which include any filed by the HOA for a balance due or architectural violations. In those cases, the buyer is on the hook to satisfy them.
In some states, like Oregon, the HOA has an automatic lien by virtue of authority found in the recorded governing documents and state statute which recognizes that authority. In those states, even if there is no specific lien filed against a home or unit, the HOA still has one and can enforce satisfaction.
Since money is what fuels the HOA's ability to function, collecting all that is due is critical. Much of the sale closing confusion can be avoided by aggressive collection when the debt is initially incurred and long before a sale takes place. The HOA's money collection motto should be "Carpe Aurum" (Seize the Gold). The sooner seized, the lesser missed.
For a sample Collection Policy, see the Policy Samples section at .