Oregon Liens: Can We Cut in Line?
We are often asked about the similarities and differences between planned community and condominium association liens in Oregon.
An in-depth understanding of an association’s lien rights is essential to determine the best steps for an association to take in the collection of delinquent assessments.
In Oregon, the planned community lien and the condominium lien have similar features. Most importantly, in both a planned community and a condominium, when an owner fails to pay an assessment levied by the association, the association has an automatic lien on the lot or unit for the amount of the unpaid assessment. Pursuant to both the Oregon Planned Community Act and the Oregon Condominium Act, the recording of the association’s declaration constitutes record notice and perfection of the lien for unpaid assessments.
In other words, as long as the association’s declaration is recorded (which is important to an association for a variety of reasons), when an owner fails to pay assessments in accordance with the association’s governing documents, the association has a lien against the owner’s lot or unit without having to take any additional action. Although association assessment liens are automatic, associations can record a lien on an owner’s property. Notably, both the Oregon Planned Community Act and the Oregon Condominium Act require an association to record a notice of claim of lien before an association can begin a suit to foreclose its lien.
Despite their similarities, there is a significant difference between planned community liens and condominium liens. That difference concerns lien priority. In both a planned community and a residential condominium, an association’s lien for unpaid assessments is junior to (1) tax and assessment liens, and (2) a first mortgage or trust deed of record. Otherwise, an association’s lien is prior to a homestead exemption and all other liens or encumbrances upon a unit or lot. The difference is that a condominium association’s lien may be able to gain priority over the first mortgage or trust deed of record if the association complies with the requirements set forth in the Oregon Condominium Act.
In other words, if a condominium association meets the statutory requirements, the association’s lien can cut in line in front of the lender to receive payment upon the sale or conveyance of the unit. In that way, lien priority is a lot like Black Friday. The ability to cut in line could make all the difference.
In sum, although association liens for condominiums and planned communities share similarities, a condominium association’s ability to cut in line in front of the first mortgage or trust deed is a significant benefit. Although the automatic lien can protect both planned community associations and condominium associations, condominium associations should note the added lien priority benefit when determining the best approach in the collection of delinquent assessments.
For further reading on when to amend governing documents please visit Barker Martin’s Northwest Condo and HOA Law Blog.
As always, please feel free to contact me with specific questions on this or any topic of interest to you regarding common interest associations.