Like it or not, an HOA foreclosure in Texas is a real possibility for homeowners who fail to pay their dues and assessments. Board members must understand foreclosure laws to ensure they don’t infringe on homeowners’ rights or put the association at risk. Similarly, homeowners must know these laws so they can keep the association in check.
Why Does an HOA Foreclosure in Texas Happen?
People often hear the term “foreclosure” and correlate it with unpaid property taxes, but the government isn’t the only entity that can foreclose on a property. Homeowners associations typically also have the power to foreclose after proper notice and a lien.
In an HOA, homeowners are obligated to pay dues and assessments to the association. These dues cover the community’s shared expenses. When homeowners fall behind on their dues, they may face several consequences.
These consequences typically start out small, with late fees or interest charges. From there, penalties can escalate if the owner continues to refuse to settle their debt with the HOA. They can face a temporary suspension of their privileges, legal action, and even a lien on the home. A lien may seem harmless, but it can interfere with an owner’s ability to sell their house or refinance their mortgage.
Worse yet, a lien can eventually lead to foreclosure, assuming the HOA has the authority to initiate proceedings. Foreclosure will trigger a sale, leading to the homeowner losing their house, all because they failed to pay their association dues.
Can a Homeowners Association Foreclose on Your Home in Texas?
In Texas, whether or not an HOA can foreclose on a home depends on its governing documents. The CC&Rs, in particular, should detail whether the association has this authority. This only applies to homeowners associations.
Condo associations, on the other hand, get their power from state law. According to Section 82.113 of the Uniform Condominium Act, COAs in Texas have the right to foreclose either by judicial or nonjudicial means.
That said, both HOAs and COAs must follow proper procedures and notice requirements. Failure to do so can render the foreclosure ineffective.
What are HOA Liens in Texas?
An HOA lien is a claim an association places on a home to secure payment of a debt if the property is sold. The association doesn’t have to wait for the owner to sell their home. In fact, it can force the sale itself to collect the unpaid debt.
Board members should know that HOAs don’t have the inherent right to place liens under Texas law. The association’s governing documents should specifically state that it has this power. These documents must also detail the types of debts that may be subject to the lien, such as regular fees, special assessments, fines, and attorneys’ fees.
Liens and foreclosures are extreme methods of collection. Because of this, associations must use them as a last resort, and only after exhausting all other options.
Additionally, there are some notice requirements that associations must follow before filing the lien. Under Section 209.0094, an HOA must send two notices before recording a lien.
- The association must send the first notice via first-class mail or email.
- The association must then send the second notice by certified mail at least 30 days after sending the first.
To file a lien, the association must wait at least 90 days after sending the second notice. The 90-day waiting period is meant to give the homeowner a chance to pay their unpaid dues and stop the lien.
HOA Laws on Foreclosure in Texas
An HOA’s governing documents should state when a lien is automatically created. For most associations, this happens upon the recordation of the declaration. Associations also typically record lien notices with the county.
To collect on the overdue payments, an HOA can then foreclose on the lien. Board members must follow Texas HOA foreclosure laws to avoid voiding the action and minimizing liability. Seeking help from an HOA lawyer or an HOA management company is always best.
There are two ways an HOA can foreclose on a lien: judicially or nonjudicially.
- A judicial foreclosure involves filing a lawsuit against the homeowner in the county or district court where the home is located. If the HOA wins the lawsuit, the judge will order a sheriff to take and sell the home in a public auction. Proceeds from the sale can then be used to settle the debt to the association.
- A nonjudicial foreclosure requires an association’s representative or trustee to sell the property at a public auction. While a court doesn’t need to order the sale, the HOA must still secure an expedited court order allowing it to pursue the foreclosure.
It is important to note that not all HOAs have the right to foreclose nonjudicially. This is not a state-given authority. The association’s governing documents must expressly grant this right or a “power of sale” (Section 209.0092).
A lien can cover everything from unpaid dues and assessments to fines and attorneys’ fees. That said, under Section 209.009, an HOA can’t foreclose on a lien if it consists solely of:
- Fines,
- Attorneys’ fees that are exclusively related to the fines, or
- Fees that cover the cost of compiling or producing the association’s records.
COA Laws on Foreclosure in Texas
Unlike HOA liens, COA liens are automatically created upon the recordation of the association’s declaration. This means that the COA doesn’t need to provide notice or record the lien separately, unless the governing documents say otherwise.
As with HOAs, COAs may foreclose on liens through judicial or nonjudicial means. The judicial process involves filing a lawsuit, whereas the nonjudicial process requires only an expedited court order.
Unlike HOAs, COAs have the power to foreclose nonjudicially under state law, unless the governing documents prohibit it. That said, COAs also can’t foreclose on a lien consisting only of fines (Section 82.113).
Frequently Asked Questions on HOA Foreclosure in Texas
Can an HOA foreclose on a home?
Whether an HOA has the authority to foreclose on a home depends on state law and its governing documents. In Texas, HOAs don’t have a statutory right to foreclose.
This power derives from the association’s CC&Rs. On the other hand, condo associations do have the power to foreclose under Texas law.
Can an HOA foreclose on your home for fines?
A lien can include fines, as well as other overdue payments such as unpaid dues or assessments, late fees, and attorneys’ fees. That said, in Texas, foreclosure is prohibited if the lien consists solely of fines.
Can homestead exemptions affect HOA liens?
Yes, homestead exemptions may affect HOA liens. Associations must check if the homestead exemption can interfere with their power to foreclose. An HOA can avoid this exemption by attaching the lien on or before the date the homeowner assumed ownership of the property. This generally happens upon the recordation of the CC&Rs.
That said, if the HOA’s CC&Rs contain vague or contradictory language, a homestead exemption may prevent the HOA from foreclosing. It is best to consult a legal professional to resolve this issue.
How long does it take for an HOA to foreclose in Texas?
Nonjudicial foreclosures tend to be quick, as they are expedited and don’t require a lawsuit. These types of HOA foreclosures can take 50 days or less. Judicial foreclosures, on the other hand, usually take much longer — from several months to more than a year.
What is the redemption period for HOA foreclosures in Texas?
The redemption period allows a homeowner to buy their property back from the HOA after a foreclosure sale. In Texas, this period lasts 180 days from the date the HOA sends a post-foreclosure notice of redemption rights to the previous owner (Section 209.011).
What is the redemption period for COA foreclosures in Texas?
The redemption period allows an owner to buy their unit back from the COA after a foreclosure sale. In Texas, this period lasts 90 days following the foreclosure sale date (Section 82.113).
Can you get your house back after foreclosure in Texas?
Yes, owners in Texas may buy their house back from the HOA or COA even after foreclosure. According to Sections 209.011 and 82.113, to redeem the property when an HOA or COA buys it at a foreclosure sale, the owner must pay:
- All amounts owed to the association as of the sale date,
- Interest,
- Reasonable attorneys’ fees and related costs,
- Any assessments charged after the sale, and
- Any reasonable expenses the association incurred, including maintenance or leasing costs.
Can you stop an HOA foreclosure in Texas?
While not guaranteed, owners have a few options to stop an association from foreclosing on the home. These options include resolving the delinquency or remedying the violation, entering a payment plan with the association, filing for bankruptcy, or contesting the lien and subsequent foreclosure.
Proceed With Caution
It is often tricky to navigate the requirements and procedures of an HOA foreclosure in Texas. While foreclosures provide a way for associations to collect debt, they should be treated as a last resort. When in doubt, it’s best to consult an HOA lawyer or management company for help.
Graham Management offers exceptional HOA management services to Houston communities. Call us today at (713) 334-8000, request a proposal, or contact us online to learn more.
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