Lien for Unpaid Assessments
Under Oregon state law, condominium associations and homeowner associations have an automatic lien against the unit or lot for unpaid assessments. In Washington, a condominium association has a lien on a unit for any unpaid assessments levied against a unit from the time the assessment is due. Unfortunately for Washington homeowner’s associations, the state law is silent and does not specifically provide that the homeowner’s association has a lien against the lot for unpaid assessments. However, most of the time, the association’s specific governing documents will create a lien for the unpaid assessments. For Washington homeowner’s associations, you will need to look at your association’s governing documents to determine whether your association has a lien for unpaid assessments.
For Washington condominium associations and Oregon condominium and homeowner’s associations, the association has an automatically perfected lien based on the recording of the Declaration or Covenants. That being said, recording a paper lien with the county puts all parties on notice of the amounts owed to the association and of the existence of the association’s lien. It also helps ensure that the association will be contacted to resolve the lien and clear title if the owner sells or refinances the property. Also, in Oregon, the association must record a paper lien with the county before the association can proceed with a foreclosure lawsuit. Again, for Washington homeowner’s associations, you will need to look at your association’s governing documents to determine whether you are required to record a paper lien with the county.
The priority of the association’s lien as to other liens and encumbrances against the property is determined by both state law and the association’s governing documents. In Oregon, the condominium and homeowner association’s lien is prior to all other liens and encumbrances, except for tax and assessment liens and a first mortgage or deed of trust. An Oregon condominium association may also be able to gain complete/full priority over the first mortgage or deed of trust if certain default and notice requirements are met. In Washington, the lien of a condominium association created after July 1, 1990 is prior to all other liens and encumbrances except for tax liens, liens and encumbrances recorded before the association’s declaration, and a mortgage or deed of trust on the unit recorded before the date on which the assessment became delinquent; except that, the association’s lien is also prior to the mortgage or deed of trust for up to 6 months of common expense assessments (often referred to as the 6-months’ dues priority amount). For Washington condominiums created on or before July 1, 1990 and all Washington homeowner’s associations, you will need to look at your association’s governing documents to determine the priority of your association’s lien. If the governing documents are silent as to priority, then priority is determined based on the order of recording - “first in time, first in right”. This means the association’s lien will be junior and subordinate to any lien recorded before it, but prior and superior to any lien recorded after it. This is another reason why recording a paper lien with the county can be important. In a foreclosure, any liens or encumbrances junior to the lien being foreclosed will be wiped out through the foreclosure and will become unenforceable as a matter of law, whereas any lien prior or superior to the lien being foreclosed will not be impacted and will remain on the property after the foreclosure.
As a result, the association’s lien for unpaid assessments and the priority of that lien can be a valuable collection tool for the association. While not guaranteed, junior lienholders may submit payment to protect their interest in the property if the association forecloses its lien. Additionally, the association’s lien and its priority can impact the ability for the association to recover funds if the lender proceeds with foreclosure or the owner files bankruptcy.
If you have any questions about whether your association has a lien for unpaid assessments or if you would like to discuss collections, foreclosure, or bankruptcy in general, please do not hesitate to contact our office.