Understanding HOA Super Liens
Liens enable creditors to encumber a debtor’s property and initiate foreclosure. When pursuing a lien, creditors need to worry about priority – how your lien ranks against other liens. Homeowners Associations (HOAs) have super liens. The statutes do not actually use the words “super lien,” but the lien rights HOA’s get are superior to other liens.
In order to be eligible for a super lien, the HOA must be incorporated as a limited liability company. The lien must be for assessments against a unit or fines against the unit owner. C.R.S. § 38-33.3-316(1). Beyond assessments, the HOA super lien can also include late fees, attorneys’ fees, fines, and interest. First Atl. Mortgage v. Sunstone N. Homeowners Ass’n, 121 P.3d 254 (Colo. App. 2005).
Once the HOA records the declaration of lien with the clerk and recorder in the county where the property is located, it is perfected. C.R.S. § 38-33.3-316(4). At this point the lien has priority over other liens that were previously filed including mechanics liens and mortgages.
While super liens take priority over most other liens, there are several categories that retain priority. Governmental liens, assessments or charges, including tax liens, are unaffected by a super lien. C.R.S. § 38-33.3-316(2)(a)(III). A security interest that has priority over all other security interests, which was recorded and perfected prior to the date when the assessment being enforced was overdue is also unchanged. C.R.S. § 38-33.3-316(2)(a)(II). However, in regards to this final type of interest, a super lien may gain priority over a prior recorded and perfected security interest to the extent that the lien amount is for assessments scheduled by a periodic budget to come due in the six months before foreclosing the lien.
In order to foreclose a super lien, the assessments owed must exceed the value of six months’ worth of common interest assessments. Sixth Ave. W. Townhouses Two Ass’n v. Bara, 2018 Colo. Dist. LEXIS 1592. Foreclosure actions for an HOA super lien mirror the mortgage foreclosure process. C.R.S. § 38-33.3-316(11).
HOAs have six years from the time the full value of the assessments become due in which to take action on the lien, otherwise, the lien is extinguished. C.R.S. § 38-33.3-316(5). If you manage an HOA and want to file a super lien or are on the board of an HOA, please contact one of our real estate attorneys today to discuss your options.
For more information, call Jorgensen, Brownell & Pepin, P.C. today at (720) 809-8310.