Unpaid Assessments: Liens & Personal Obligations – Part I
By: Alexis Ducich
Under state law in Washington and Oregon, Condominium and Homeowner Associations have the authority to adopt and amend budgets, and levy and collect assessments from owners for the common expenses. But it can be confusing what happens when an owner does not pay the assessment. This two-part article discusses the personal obligation of the owner to pay the assessment and the lien that is created when the assessment is not paid. Next week will discuss the effects of sales, foreclosures and bankruptcy on both the personal obligation and the lien.
Typically, unless the Association’s governing documents provide otherwise, unpaid assessments constitute a lien upon the unit or lot from the date the assessment was due. This lien arises automatically when the assessment becomes delinquent. Technically, the Association does not have to do anything to “perfect” or create the lien, because the Acts and the Declaration establish them. However, the Association can record a “paper lien” (Notice of Claim of Lien) to put all parties, including the owner, on notice of the Association’s lien for unpaid assessments. The lien attaches to the unit or lot – not to the individual owners – and remains on the lot or unit until it is paid or is affected by other issues to be discussed next week. Assessment liens can be foreclosed and the property sold to pay the debt in a foreclosure action.
However, in addition to constituting a lien on the unit or lot, each assessment is typically defined in the governing documents as the “joint and several” personal obligation of the owners of the unit or lot as of the time the assessment was due. Generally, this just means that whoever owns the lot or unit at the time the assessment becomes due has the obligation to pay that amount, even if there are multiple owners on the title. The personal obligation attaches to the owners, not the lot or unit, so the delinquency can be pursued even if the owners sell the unit or lot. Collection of the personal obligation works more like collecting on a contract, so the Association can file a “personal obligation” lawsuit against a delinquent owner to obtain a money judgment.
Associations generally have the option of whether they want to foreclose a lot or unit or pursue an owner on the personal obligation. Most governing documents allow the Association to do both. Deciding the best course of action to take to recover the unpaid assessments depends on the circumstances of each account. Factors such as the amount owed to the Association, the age of the debt and the occupancy of the unit or lot are all relevant considerations. Additional factors, such as the sale of a unit or lot at the time of a delinquency, foreclosure of the lot or unit by another party, and personal bankruptcy of the owner, should also be considered. These issues will be discussed next week in Part II of this Article. Stay tuned!