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Foreclosures and Liens — by Wendy Koch
March 2009
With the rapid increase in foreclosures, many homeowners associations are asking the question: what happens to the lien the HOA recorded when the home goes into foreclosure?
In general, HOA assessments are both a personal obligation of the owner AND a debt of the property. Lake Limerick Country Club v. Hunt Mfg. Homes, Inc., 120 Wn. App 246 (2004). This means that the “property’s” debt continues to accrue from ownership to ownership. It also means that the “owner’s” debt accrues only during his ownership and can be collected only from that particular owner.
When an HOA records a lien, it, in essence, is securing the “property’s” debt. The HOA may initiate a judicial foreclosure of their lien, however, in the current market there often isn’t sufficient equity to pay the lien after the mortgage and other senior lienholders are paid. Once the bank’s foreclosure occurs, the HOA’s lien is extinguished.
However, the HOA can still obtain a personal judgment against the owner for the amount that accrued during that owner’s ownership. Often times it is best to do so BEFORE the owner has moved out of the property and moved away, where they are unable to be located for service. One benefit of obtaining the personal judgment is that you can then try to collect on that judgment either through a garnishment or execution.
Then, when the bank or new owner takes the title after the trustee’s sale, they are then responsible for all dues that accrue during their ownership.
Going back to the “property’s” debt that continued to accrue from ownership to ownership, our firm theorizes that the new owner is responsible for the dues that accrued before they took ownership (despite the fact that the lien was extinguished) due to the fact that the debt also belongs to the property, but this theory is of yet untested.
Thus, Board’s should be advised that their liens will be extinguished on the date of the trustee’s sale, but all is not lost because the debt may still be collectible by bringing an action against the property owner personally.
The most important thing to keep in mind is that these general guidelines may be modified by the HOA’s CC&Rs, so particular attention should be paid to the language of the Assessment and Collection provisions.
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Attorney Robert Dickson
The core of Rob’s legal practice is civil litigation, with an emphasis on construction, real estate, and business law. He represents a wide range of clients, from large construction companies to individual homeowners. His is a practical approach to law, which strives to balance the need for a successful legal outcome with a client’s financial goals (or constraints). Outside of his private practice, Rob serves as an adjunct professor at the Seattle University School of Law where he teaches real estate litigation. [ Attorney Bio ]
Thomas L. Dickson
Tom is an experienced litigator and the founding partner of the firm. For over 30 years, he’s helped clients prevail in their real estate, construction, and business law matters.
Heather Burgess
Heather represents property owners and developers in all phases of real estate development, from pre-acquisition due diligence through local permitting and appeals.
Robert P. Dickson
The core of Rob’s legal practice is civil litigation, with an emphasis on construction, real estate, and business law. He represents a wide range of clients, from large construction companies to individual homeowners.
Daniel J. Frohlich
Dan’s legal practice focuses on civil litigation, real estate law, business law and probate law. He has more than 10 years of experience as an attorney serving clients throughout Western Washington.
Mark S. Johnson
Mark’s legal practice focuses on civil litigation, real estate law, business law and family law. He works tirelessly to help his clients achieve the outcome they are looking for.
Trevor A. Zandell
Since graduating with honors from law school in 2005, Trevor has been serving the legal needs of businesses, individuals, and families across Southwest Washington.
Daniel E. Pizarro
As an associate at Dickson Frohlich Phillips Burgess, Daniel is active in the firm’s civil litigation department. His practice is mainly centered around real estate law, landlord-tenant law, construction law, and probate law.
Alexander J. Wisbey
Alexander Wisbey comes to the firm with 5 years of experience as a litigator and trial attorney. He has first chaired several jury trials and has extensive experience handling arbitrations, mediations, depositions, and settlements.
Andrew Hata
Andrew is the head of our Transactional Department and focuses his practice on corporate governance, real estate transactions, commercial contracts, and corporate finance.
Kelley Duggan
As an associate at Dickson Frohlich Phillips Burgess, Kelley practices in a wide range of areas, including estate planning, probate, civil litigation, and intellectual property law.
Cambria A. Queen
Cambria is an Associate with Dickson Frohlich Phillips Burgess in the civil litigation department, where she practices primarily real estate and probate law.
George Knight
As an associate at Dickson Frohlich Phillips Burgess, George is active in the firm’s civil litigation and transactional departments. His practice is mainly centered around business law, real estate law, construction law, employment law, and probate law.
Chris Pierce-Wright
Chris comes to Phillips Burgess Tacoma from Seattle, where he served as an associate attorney focused on insurance litigation with Wilson Smith Cochran Dickerson.
Jennifer Yoo
Jennifer is an associate attorney at Dickson Frohlich Phillips Burgess where her current practice focuses on real estate law, contract and commercial disputes, and business law.
Katherine E. Baals
As an associate at Dickson Frohlich Phillips Burgess, Katherine practices in a range of areas, including real estate, construction, business, and civil litigation.
Kenneth Chan
As an associate at Dickson Frohlich Phillips Burgess, PLLC, Kenny is active in the firm’s civil litigation and transactional departments. Prior to working at Dickson Frohlich Phillips Burgess, Kenny was an in-house attorney for a Fortune 100 company.
Brian Buske
Following his graduation from Lewis & Clark Law School, Brian garnered valuable client experience working on international compliance and intellectual property issues.
Kyla S. Bennett
As an associate at Dickson Frohlich Phillips Burgess, Kyla practices in a range of areas, including real estate, land use, and civil litigation.
