If you do not pay your HOA or COA assessments in Hawaii, the association may get a lien on your property and foreclose on it.
When you purchase a single-family home, townhouse, or condominium in a covenanted neighborhood, you will almost certainly be required to pay fees and assessments to a homeowners’ association (HOA) or condominium owners’ organization (COA). If you fall behind on your assessments, the association will most likely attempt to recover the debt by regular means first. For example, the association will most likely contact you and send you letters. If such efforts don’t work, the association will most likely attempt another method of collecting from you. The association may revoke your usage of the common facilities or initiate a lawsuit to obtain a monetary judgment against you. Most HOAs and COAs have the authority to place a lien on your property if you fall behind on your assessments. Not only would an assessment lien obscure the title to the property, making it difficult to sell or refinance, but the property may also be repossessed to compel a transfer to a new owner—even if the property has a mortgage.
If your house is part of a HOA or COA in Hawaii and you fall behind on assessments:
The HOA or COA may generally get a lien on your property.
Overdue assessments may usually be charged by the association, including late fees, lawyers’ fees and charges, interest, and penalties.
If the association decides to foreclose the lien, the procedure might be either judicial or nonjudicial. However, an association cannot employ a nonjudicial method to foreclose a debt that is simply the result of fines, penalties, legal fees, or late fees; the lien must be foreclosed judicially.
If a HOA or COA debt is foreclosed, what happens to other liens, such as a mortgage lien?
If the HOA or COA launches a foreclosure action, you may have a defense or be able to negotiate a means to catch up on the late sums and keep your house.
Hawaii HOA and COA Laws
HOAs in subdivision communities and COAs are sometimes governed by different sets of state regulations. Haw. Rev. Stat. 421J-1 through 421J-16 control planned community organizations in Hawaii. Condominiums are governed by the Condominium Property Act (514B-1 through 514B-163). (On January 1, 2019, Chapter 514A, often known as the “Condominium Property Act,” was abolished. However, the repeal did not render unlawful any condominium property system properly established under that statute prior to July 1, 2006. The Condominium Property Act applies to all condos in the state, provided that such applicability does not render existing portions of a condominium’s governing papers unlawful if doing so would render a developer’s reserved rights invalid.)
This article concentrates on the Condominium Property Act and Hawaii’s planned community association legislation.
In General, How Do HOA and COA Liens Work?
Most HOAs and COAs have the authority to put a lien on your house if you fall behind on your assessments, based on the Declaration of Covenants, Conditions, and Restrictions (CC&Rs) or Declaration of Condominium and state law. If you go behind on your payments, a lien will normally be placed on your property. In certain circumstances, regardless of whether state law mandates registration, the organization will register its lien with the county registrar to give public notice that the lien exists.
Hawaii HOA and COA Liens
In Hawaii, any monies assessed by the association but not paid constitute a lien on the property. 421J-10.5(a), 514B-146(a) (Haw. Rev. Stat.
Charges that a HOA or COA May Incorporate into a Lien
In general, a HOA or COA may add certain charges and penalties in the lien, such as late fees, lawyers’ fees and expenses, interest (up to 18% for COAs), and fines. 421J-10.5(a), 514B-146(a), 514B-144(b) (Haw. Rev. Stat.
Requesting a Statement of Due Amounts
You have the right to seek a written statement that clearly shows the amount of common expenditures included in the assessment payable. 421J-10.5 (c), 514B-146(c) (Haw. Rev. Stat.).
Foreclosures on HOA and COA Liens in Hawaii
If a HOA or COA has a debt, it may be forced to foreclose. An HOA or COA in Hawaii may foreclose its lien either judicially or nonjudicially. 421J-10.5(a), 514B-146(a) (Haw. Rev. Stat. However, under state law, HOAs and COAs have an alternative nonjudicial foreclosure procedure that is distinct from nonjudicial foreclosures conducted by mortgage lenders. (Haw. Rev. Stat. 667-91 and thereafter).
Nonjudicial Alternative Foreclosure Procedure
The association must produce and register a Notice of Default and Intention to Foreclose under Hawaii’s alternative nonjudicial foreclosure procedure, which must be served to the delinquent owner and other parties. The owner now has:
30 days from the date of service to submit a payment plan to the association, or 60 days from the date of service to cure the default. 667-92 (Haw. Rev. Stat.
If the owner offers written notice of intent to cure or submits a payment plan, the foreclosure must be delayed for the duration of the 60-day cure period or the length of the payment plan, whichever comes first. 667-92 (Haw. Rev. Stat. Payment arrangements that are “reasonable” must be accepted by associations. A fair payment plan include paying any assessments that become due after the date of the proposed payment plan, as well as a payment plan for the unpaid sum that may be finished within 12 months. However, the board of directors may authorize longer-term payment schemes. 667-92 (Haw. Rev. Stat.
If the parties cannot reach an agreement on a payment plan and the default remains uncured, the association may sell the house at a public auction after posting notice of the sale and notifying the homeowner and other parties. The following items may be sold:
60 days after the public notice of the sale is disseminated, or 14 days after the notice’s final publication, whichever is later. (See Haw. Rev. Stat. 667-95, 697-96).
Foreclosure Restriction
A lien arising only from fines, penalties, legal expenses, or late fees cannot be foreclosed nonjudicially by a HOA or COA. Any such lien’s foreclosure must be filed in court. 421J-10.5(a), 514B-146(a) (Haw. Rev. Stat.
The right to mediate
If the homeowner disputes the amount owed, the homeowner may request mediation with the association. However, you must first pay the entire amount of the assessments and maintain them current. 421J-10.5(c),(d), 514B-146(d),(f) (Haw. Rev. Stat. Consult a lawyer to determine the particular procedures you must take to compel the association to enter into mediation.
Limitation of Liability
The enforcement of a HOA or COA lien must commence within six years of the assessment becoming due. 421J-10.5(a), 514B-146(a) (Haw. Rev. Stat. The statute of limitations is tolled (delayed) until 30 days after the automatic stay is removed if the homeowner enters bankruptcy. 421J-10.5(a), 514B-146(a) (Haw. Rev. Stat.
HOA and COA Liens, as well as Your Mortgage
A widespread misperception is that the association cannot foreclosure if your mortgage payments are current. However, whether or not you are current on your mortgage does not affect an association’s power to foreclose. Instead, what occurs in a foreclosure is determined by lien priority.
What Is the Definition of Lien Priority?
The priority of liens affects who gets paid first after a foreclosure auction and, in many cases, whether a lienholder gets paid at all. Liens normally follow the “first in time, first in right” rule, which states that the lien that is registered first in the land records takes precedence over subsequent recorded liens. A first-lien has a higher priority than other liens and receives first dibs on the earnings of the foreclosure auction. If any funds remain after paying off the first lien, they are distributed to the second lienholder until that lien is paid off, and so on. A low-priority lien may get nothing from a foreclosure auction.
However, state law or the governing papers of an organization might change lien priority.
In Hawaii, HOA and COA Lien Priority
In general, in Hawaii, the priority of a HOA lien is decided by the association papers or, if no priority is specified in the association agreements, by the date the lien is registered. 421J-10.5(a) (Haw. Rev. Stat.). A COA lien for unpaid assessments normally takes precedence over all other liens, with the exception of:
liens for taxes and assessments duly imposed by governmental authority, including any payments owed on any mortgage recorded prior to the association’s recording of a notice of a lien. 514B-146(a) (Haw. Rev. Stat.
In Hawaii, however, six months’ worth of unpaid regular monthly common assessments levied during the six months immediately before the execution of the judicial or nonjudicial power of sale foreclosure are considered super-liens. 421J-10.5(g)(h), 514B-146(j)(k) (Haw. Rev. Stat.