Homeowner’s Guide: What is an HOA Lien in Maryland?

What is an HOA Lien in Maryland

If you’ve fallen far behind on your HOA or condo dues, your HOA can place a lien on your home. Eventually, your HOA will likely foreclose on the lien and take your home. But what is an HOA lien in Maryland, and what are its implications?

In this article, we’ll discuss the question “What is an HOA lien in Maryland?” and discuss the HOA lien process so you can better understand your options.

What is an HOA Lien in Maryland?

Your HOA has the power to place a lien on your home. An HOA lien is a legal claim placed on your property by your Homeowners Association when you fail to pay your HOA dues or assessments. This lien serves as a way for the HOA to collect any outstanding debt you owe.

HOA liens differ from other types of liens in several ways:

  • They are specific to properties governed by an HOA.
  • They are typically triggered by the failure to pay HOA dues or assessments.
  • They can be enforced through the HOA’s foreclosure process or via a “Sheriff’s Sale,” which is faster than a traditional mortgage foreclosure.
  • They accrue interest in Maryland at a staggering rate of 18%.

HOA liens can have severe consequences for your property ownership. If your HOA places a lien on your home, you must act now.

When Can an HOA File a Lien?

Now that you understand “What is an HOA lien in Maryland,” let’s discuss when an HOA can file a lien.

Typically, an HOA can file a lien when:

  • You have missed a specified number of HOA payments.
  • The HOA has sent you proper notice of the delinquency.
  • You failed to remedy the situation within the given timeframe.

The specific requirements for filing a lien may vary depending on your HOA’s governing documents.

If you find yourself in a situation where an HOA lien is being filed against your property, it’s essential to act quickly and seek guidance to protect your rights and interests.

How Does an HOA File a Lien? HOA Lien Process

Step 1: Delinquency

When you fail to pay your HOA dues or assessments, you become “delinquent.”

HOA fees are used to maintain common areas and provide services to the community. Failing to pay these fees can result in late fees and other penalties. Most HOAs have a grace period—typically 15 days—before considering a payment late, so review your HOA’s policies.

Step 2: Notice of Delinquency

If your payment is not received within the grace period, the HOA will send you an initial notice of delinquency. This notice will outline the amount owed, including any accrued late fees. It will also provide a timeframe for payment and inform you of the potential consequences of failing to pay—such as a lien being placed on your property.

Step 3: Lien Filing

If you do not pay the outstanding amount within the given timeframe, your HOA can proceed with filing a lien against your property. They will start preparing and filing legal documents.

You will then be notified of the lien filing, either by mail or in person.

Step 4: Lien Recordation

Once the lien is filed, it will be recorded with your county’s Land Record’s office. This record gives your HOA priority over other liens, triggers 18% interest, and is a “super-priority” lien.

The lien will remain in effect until the debt is paid or your property is sold.

Your HOA Can Execute on a Lien and Foreclose on Your Property

An HOA lien grants the association the power to foreclose on your property if the debt remains unpaid.

The foreclosure process can be initiated once the lien is in place, or the HOA can win a lawsuit against you and your home could be auctioned off in a Sheriff’s Sale.

If your property is foreclosed on or sold in a Sheriff’s Sale, you will lose your home and any equity you have built up in it.

Other Consequences of an HOA Lien

Once you understand “What is an HOA lien in Maryland?” and the risk of foreclosure, it’s important to discuss the other consequences. Liens have far-reaching effects beyond just the immediate debt owed to the association:

Impact on Credit Score

The lien will be reported to or picked up by credit bureaus, lowering your score and making it harder and more expensive to obtain future financing for a car or another home.

Difficulty Selling or Refinancing

Having an HOA lien may prevent you from selling or refinancing your property because it has to be paid off when the home sells.

Homeowner Rights and Options

Requesting Validation of the Debt

You have the right to request proof that any debt is valid and accurate. This can help ensure that you’re being charged correctly and that there are no errors in the HOA’s records.

Disputing the Lien with Your HOA

If you believe the lien is invalid or inaccurate, you can dispute it with your HOA. You will need to present evidence to support your case and negotiate with the HOA to resolve the issue.

Negotiating a Payment Plan

If you’re unable to pay the full amount owed, you may be able to negotiate a payment plan with your HOA. This can help you catch up on your payments over time and avoid further legal action.

Filing for Bankruptcy Protection

Filing for bankruptcy will provide immediate relief from HOA liens, stopping foreclosure and a Sheriff’s Sale. Consult with a bankruptcy attorney to determine if this is the right choice for your situation.

How Bankruptcy Can Alleviate Your HOA Lien Burden

The moment you file for bankruptcy, an ‘automatic stay’ is triggered, halting all collection and foreclosure activities. Filing for bankruptcy even one minute before your home is sold at auction will halt the process.

Chapter 13 Bankruptcy

Under Chapter 13 bankruptcy, you can manage liens through a structured repayment plan. This plan allows you to:

  • Consolidate your debts, including HOA liens, into one manageable payment.
  • Potentially reduce the total amount owed if the lien exceeds the value of your property.
  • Spread payments over a 3-5 year period, making it easier to catch up without immediate financial strain.

It’s important to note that while Chapter 7 bankruptcy may discharge other types of debt, it typically does not eliminate HOA liens if you plan to keep your property.

Chapter 11 Bankruptcy

Chapter 11 bankruptcy is another option that provides relief from burdensome HOA liens, particularly for individuals with significant assets or businesses. Here are some key benefits of using Chapter 11 to address HOA liens:

  • Propose a reorganization plan that restructures your debts, including liens, into more manageable payments over time.
  • Potentially negotiate with the HOA to reduce the total amount owed or extend the repayment timeline as part of your reorganization plan.
  • Retain control over your assets as a “debtor in possession,” allowing you to continue managing your financial affairs while working through the bankruptcy.

Chapter 11 can be a good choice if you have substantial equity in your property and want to protect it from foreclosure due to HOA liens. However, it’s more complex and costly than Chapter 13, so consider your options with the guidance of a bankruptcy attorney.

Key Takeaways

  • An HOA lien is a legal claim placed on your property when you fail to pay HOA dues or assessments.
  • HOA liens can lead to the loss of your home through foreclosure or a Sheriff’s Sale
  • Before filing a lien, the HOA must provide notice of delinquency and allow time for you to remedy the situation.
  • HOA liens can damage your credit score, hamper your ability to sell or refinance your property, and expose you to personal liability for outstanding debt.
  • Homeowners have options including requesting debt validation, disputing the lien, negotiating a payment plan, and filing for bankruptcy protection.
  • Filing Chapter 13 or 11 bankruptcy triggers an automatic stay, halting collections and letting you propose a plan to pay back your debt.
  • Speak to a bankruptcy attorney to determine the best path forward.

Facing an HOA Lien? Steiner Law Group Can Help

Don’t deal with HOA liens alone. The experienced attorneys at Steiner Law Group are here to guide you through your bankruptcy options and find the best possible solution to protect your home and financial future. Take control of your situation. Contact us today for a consultation or call us at (410) 670-7060.

Frequently Asked Questions (FAQs)

Does Bankruptcy Eliminate a Lien?

  • In Chapter 11 and Chapter 13, you can avoid an HOA lien if it’s fully unsecured. When someone files for bankruptcy under Chapters 11 or 13, they might be able to remove an HOA lien if the property has no equity. Equity is the difference between the property’s value and the amount owed on the first mortgage.
  • For example, if a house is worth $150k but the owner owes $200k on their first mortgage, there is no equity. In this case, the HOA lien can be removed, and the debt becomes unsecured. The HOA will then receive a portion of the payment.
  • Additionally, if the bankruptcy is filed within 90 days of the lien being recorded, it can be removed in any chapter, including Chapter 7. This essentially undoes the lien placement.
  • However, due to currently high property values, it’s uncommon to find houses without at least some equity.
  • Steiner Law Group had a recent case where we avoided ten liens and got our client a discharge.
  • To learn more, contact us today!
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About Eric Steiner, Esquire

Mr. Steiner graduated from the University of Michigan Law School in 2006. Since then, he has focused his practice on bankruptcy, real estate, commercial and consumer collections, including representing the third largest lender in the greater Baltimore area.