Condo associations can foreclose, too

Past due stamped on envelope

You know you can lose your home for not paying the mortgage.

Did you know you can also lose it for not paying your condo or homeowner association fees and assessments -- even if you're current on the mortgage?

"Because of the economic downturn and the problems homeowners are having with their finances in general, more people are letting assessments go, not realizing the authority that the association has to undertake a foreclosure," says Daniel Greenstein, an expert on condos at Bernick, Lifson, Greenstein, Greene & Liszt, a Minneapolis law firm.

Rules vary by state, so check communitiesonline.org to see how late you can be and how much you can owe before your homeowners association (HOA) can start foreclosure proceedings.

In California, for example, associations can foreclose after homeowners have missed payments for 12 months or owe $1,800 in back fees.

The general idea is the same no matter where you live: Property owners are just as beholden to the homeowner association as they are to the bank holding their mortgage.

If you stop paying your fees and assessments, your condo board has the right to file a lien against your property.

If you fall far enough behind, it can foreclose on that lien and force you out of your home.

Homeowner associations only do that as a last resort because of the legal expenses and the fact that the association becomes responsible for the unit after an owner is evicted.

But the recession has forced thousands of condo owners to decide between paying their mortgage or their condo fees -- and they've chosen to pay their mortgage.

As the number of delinquent property owners has grown, more condo associations have been forced to foreclose so they can keep up with insurance premiums, maintenance bills and other costs.

If you know you're about to hit a rough patch or are already behind on your fees, Greenstein recommends talking to your association before it comes looking for you.

"Five or six years ago, very few HOAs allowed payment plans for delinquent owners," Greenstein says. "Now, in this economy, most associations will allow some sort of payment plan so homeowners can get caught up."

They're also more likely to work with you than the bank that holds your mortgage, because the board members are your neighbors and condo fees are usually much less than missed mortgage payments.

"There's a personal relationship between association and owner," says Ken Arnold, CEO of Association Financial Services, a Miami-based company that offers financial services to condominium associations. "They're more likely to have sympathy than traditional lenders."